2015 saw the first year of upwards downwards rent reviews in Ireland but in reality has the legislation achieved what it set out to do?
A lack of office space within the capital and the rise in rental values in prime locations within the retail sector has left tenants disconcerted and often at the receiving end of a rental increase. It will remain to be seen over the course of 2016 whether those tenants facing rental increases will opt to remain in their current premises or will seek to assign, sub-let or relocate.
Within the office sector a contribution of the high demand for office space, the lack of availability of modern office accommodation and the small volume of “new office stock” due to be delivered during 2016 means it seems likely that tenants will remain in their current accommodation and are unlikely to exercise any break options.
The retail sector is not dissimilar. Retailers with increasing turnover are competing with other brands for prime location stores which has lead to the increase in rental values within the City Centre despite the “greedy landlord” misconception.
Whilst it remains to see how these rent reviews will play out across 2016 both landlords and tenants alike are welcoming the development of the first full five yearly review cycle under the Arbitration Act 2010 which requires an Arbitrator setting new rent to explain their analysis of the evidence and give reasons for his decision. Parties are hoping that the Act will bring clarity and transparency to the rent review process but ultimately is it the open market which really decides?
After all the controversy about replacing the traditional "upward only" rent reviews with "upwards and downwards" reviews, market forces have dashed the hopes of tenants hoping for a lower rent in the first cycle of "five yearly reviews."