An increasing number of tenants will move to index-linked leases according to UBS Global Asset Management’s Anthony Shayle.
Speaking at the IPD conference in Brighton, the firm’s head of global property UK, said that there is more interest in index-linked leases from landlords and tenants in a volatile and unstable environment.
Questioning whether UK leases are in good shape for the long-term, Shayle looked at alternatives to the traditional open-market upward only rent review.
Drawing on lessons from France and Germany, the two largest markets by volume and value in continental Europe, he focuses on index-linked rent reviews which he said have the ability to hedge inflation and offer lower risk and greater stability when the tenant is strong.
He acknowledged that the model would not be suitable for all properties, such as offices and tenants whose income does not relate to inflation, but said they will become more common with supermarkets, hotels, government tenants and healthcare providers.
Shayle said: “Index-linked lease are here to stay in a significant way and will build in volume.”
