Retail Week Property Forum 2004 - Landlords keep upward-only, but leases shorten

Landlords still appear to hold the whip hand on commercial leases, according to research by the property department of the University of Reading.

Professor Neil Crosby, speaking at the Retail Week Property Forum, said that this year 98.4 per cent of commercial leases still have upward-only rent review clauses.

Crosby was cagey about the findings of the report, which is with the Government and will be published later this year. However, the Government wants to see more flexibility in leases and has said it will legislate to achieve this. 'The property market feels legislation is inevitable,' said Crosby.

However, Crosby's report has found that lease lengths are shortening, with shopping centre leases being less than those traditionally offered in the high street. In 1990, 25- year leases were the most common, whereas today it is 15-year leases.

Crosby said: 'It will be interesting to see whether tenants will give up part of their cash flow now for an advantage that may occur in four to five years' time. Will tenants be prepared to pay more for less onerous leases?'

Although he would not confirm it, Crosby seemed to doubt that the upward-only rent review was really such an onerous clause. He asked drily: 'If it is so awful, obviously it will be a major discussion point in every negotiation, won't it?'

Tenants are almost always prepared to accept upward-only clauses to get the right property, he noted.