Creating a Transaction-based Rent Index: Analysis of rent review, lease renewal and new letting outcomes
Webinar recording now available
On May 27 we ran a webinar on the above topic, led by Professor Steven Devaney (Department of Real Estate & Planning, Henley Business School) and Malcolm Frodsham (Real Estate Strategies).
Commercial real estate investors through their agents and asset managers are frequently involved in negotiating and re-negotiating rents – either where lease contracts end or where market-linked rent reviews exist within leases. We examine the outcomes that arise from different types of negotiation, comparing new lettings to lease renewals and rent reviews for a large sample of UK commercial real estate leases. We explore both the average outcome and range of outcomes, accounting for upward-only clauses in the rent review case. We compare outcomes in terms of headline and effective rents, where the latter adjust for the duration of any rent-free periods that were granted. Finally, we discuss using different types of lease event for constructing a transaction-based index of rental growth and compare some results to existing indexes that rely on market rental value estimates. In doing so, we contribute to a wider debate on the use of transaction-based measures to track price movements and total returns for commercial real estate assets.
Find and listen to the webinar here from our online library