Why Most Commercial Rent Reviews Underperform

Why Most Commercial Rent Reviews Underperform

Why Most Commercial Rent Reviews Underperform A commercial rent review is rarely won at the negotiation table, in reality, it is won months earlier through preparation, evidence and technical accuracy.

Yet many commercial landlords are surprised when rent reviews underperform, settle below market levels or drift into long and costly disputes. The reason is not market conditions alone, it is usually the way the rent review has been approached.

This article explains why most commercial rent reviews fail, the common technical mistakes behind underperformance, and what a properly handled rent review should look like.

The Fundamental Mistake: Treating Rent Reviews as Negotiations

One of the biggest misconceptions in commercial property is that a rent review is primarily a negotiation exercise.

It is not.

A rent review is a technical valuation process governed by the lease, market evidence and professional standards. Negotiation only works when it is supported by defensible evidence. Without that foundation, even the strongest negotiating position quickly collapses.

When rent reviews underperform, it is almost always because the groundwork was weak or missing entirely.

The Most Common Reasons Commercial Rent Reviews Underperform

1. Poor or Irrelevant Comparable Evidence

Comparable evidence is the backbone of any rent review. However, many submissions rely on:

• Transactions that are not truly comparable

• Evidence from different locations or market segments

• Outdated deals that no longer reflect current market conditions

Using weak or irrelevant comparables gives tenants an immediate opportunity to challenge the review and undermines the landlord’s position from the outset.

2. Failure to Adjust for Key Variables

Even genuinely comparable transactions require adjustment. A common technical failure is presenting headline evidence without proper analysis of differences such as:

• Incentives (rent-free periods, capital contributions)

• Size and configuration

• Specification and condition

• Location and frontage

• Covenant strength of the tenant

Without clear and logical adjustments, evidence becomes misleading rather than persuasive.

3. Overreliance on Headline Rents

Headline rents are frequently quoted, but they rarely tell the full story.

Modern commercial transactions often include significant incentives. When these are ignored, the resulting rent figure does not reflect the net effective rent, which is what the market is actually paying.

Overreliance on headline rents is one of the fastest ways for a rent review to lose credibility and stall.

4. Weak or Incorrect Interpretation of Lease Assumptions

Every rent review clause contains assumptions and disregards. Misinterpreting these can fundamentally distort the valuation.

Common errors include:

• Incorrect assumptions about condition or repair

• Misapplication of permitted use clauses

• Failure to reflect lease length and review patterns accurately

A rent review that does not strictly comply with the lease wording is vulnerable to challenge, delay or referral to third-party determination.

The Consequences for Landlords

When a commercial rent review is mishandled, landlords are typically forced into one of two undesirable outcomes:

1. Accepting a Sub-Market Rent

Agreeing to a rent below market level does not just impact current income, it can affect:

• The capital value of the property

• Future rent reviews

• Refinancing and investment decisions

Once set, that rent may remain fixed for years.

2. Prolonged and Costly Disputes

Alternatively, landlords may face drawn-out negotiations or formal dispute resolution, which can result in:

• Delayed rental uplifts

• Increased professional fees

• Strained landlord-tenant relationships

• Weakened negotiating positions in future reviews

Both outcomes are avoidable with the right preparation.

What a Properly Handled Commercial Rent Review Involves

A successful rent review is a structured, evidence-led process, not a hopeful discussion.

Accurate Measurement and Zoning

Where relevant, floor areas must be measured correctly and zoned appropriately. Errors at this stage compromise every calculation that follows.

Detailed Analysis of Genuinely Comparable Transactions

Comparable evidence should be:

• Recent

• Local

• Truly comparable in use, size, and quality

Each piece of evidence must be carefully analysed rather than simply listed.

Clear and Defensible Adjustments

Every adjustment  whether for incentives, size or specification, should be transparent, logical and supported by market reasoning. If an adjustment cannot be justified, it should not be made.

Structured Negotiation Grounded in Evidence

Negotiation should follow evidence, not replace it. A well-prepared case allows negotiations to remain commercial, focused, and efficient, reducing the risk of dispute while protecting rental value.

Rent Reviews Are Commercial Exercises, Not Gambles

The most effective landlords treat rent reviews as commercial valuation exercises, not speculative negotiations.

By preparing early, analysing evidence correctly and applying the lease accurately, landlords significantly improve outcomes and protect long-term value.

Waiting until the review date or relying on headline rents and informal discussions, almost always leads to underperformance.

Speak to a Specialist Before Value Is Lost

If you have an upcoming commercial rent review, early advice can make a measurable difference to the outcome.

Call us on 0116 402 8525 to discuss your rent review strategy before value is lost or send us a message.