The government’s decision in July to ban upward-only rent review clauses in new commercial real estate leases sent shock waves through the market. Many in the sector reacted with horror to the news.
However, Market Financial Solutions Head of CRE Adam Jaffe said there is a potential upside.
Real estate has become increasingly operational as an asset class for years. This decision could spur investors to focus on creating the best possible real estate, backed by lenders who see the potential in their business plans, he said.
“If you’re not putting effort into asset management now, whether it’s an office, retail or coliving, then you risk suffering from vacancy,” Jaffe said. “To maintain rental levels, there is real pressure on landlords to start innovating. The good news is there are lenders who want to support investors that are creating what tenants want.”
Until now, many landlords relied on potential increases in rent that come with a high interest rate environment, Jaffe said. If they can no longer rely on this, they can’t guarantee property yields. Falling rents could even mean investors find themselves breaching debt covenants.
The announcement is also likely to decrease lease lengths further, Jaffe said.
“This is going to panic landlords and investors who don’t have the skills or desire to approach value-add asset management,” he said. “From a credit point of view, how can they access a five-year loan on a building with only a three-year lease term?”
Some argue the government’s decision will reduce liquidity in the market, as lenders don’t want to lend if there is no certainty, Jaffe said. However, while this might be the case for larger lenders such as banks, the lending market has already evolved.
“The old days of investors opting for vanilla, long and strong funds to buy something and sit on it for 20 years are long gone,” he said. “Perhaps this change will start creating index-linked uplifts in leases, but in reality, it just puts more onus on landlords to create assets that lenders want to be involved with. That can only be good for the market.”
This market evolution is opening the door for alternative lenders who can provide both short-term and scheduled debt that traditional lenders cannot offer, Jaffe said.
Market Financial Solutions established its commercial real estate division to support clients across the spectrum of commercial sectors. This includes existing owned properties, acquisitions, value-add strategies and owner-occupied assets.
Jaffe said the team is premised on building relationships with clients where expertise, transparency and service are prioritised throughout the life cycle of the loan. When assessing a potential borrower, Market Financial Solutions looks for a track record that demonstrates a strong business plan.
“I’m looking to see if they know how to create and protect value in their real estate,” he said. “This includes having a micro view of assets as well as a macro perspective. They might be looking at the worst high street in the country but the best property on that high street.”
Market Financial Solutions has provided funding for many such opportunistic businesses so far in 2025, Jaffe said. Often, this is for businesses holding retail or leisure assets, which have proved less popular in the last few years.
“Alternative lenders can support businesses in sectors that others may not love,” Jaffe said. “We have enabled investors to release equity to invest in their assets as well as access better interest rates later in the year.”
There are several real estate sectors that Market Financial Solutions is particularly bullish about, Jaffe said. While UK high streets still suffer, the lender’s research found that 32% of people shop more on their local high street than five years ago. In the second quarter, vacancy rates fell across high streets, retail parks and shopping centres.
As a result, Market Financial Solutions is keen to support investors choosing strong assets in these classes. Typically, the lender provides finance between £100K and £15M.
“We take on the risk so that they can operate their strategy effectively, helping them to get to a place where they can access cheaper debt in a few years,” Jaffe said. “Our team can help because we understand what they’re trying to do and add value by going along the journey with them.”
This article was produced in collaboration between Market Financial Solutions and Studio B. Bisnow news staff was not involved in the production of this content.
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