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Rent moves could hit hotel-building

16 June 2004
Rent moves could hit hotel-building

New hotel developments are being threatened by the Government's proposals to outlaw upward-only rent review clauses in commercial leases, says property adviser CBRE Hotels.

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Rouse: proposals could reduce rents and deter developers
Chris Rouse, senior director at CBRE Hotels, speaking at the CBRE and Berwin Leighton Paisner Hotel Development Conference in London last week, said: "These proposals, if enacted, will require a reassessment of commercial and hotel property as an asset class. Hotels are a sophisticated sector of the property market and we do not believe there is any widespread problem associated with hotel tenants being badly advised." He added: "One of the strengths of the UK hotel investment market is the sensible balance that can be achieved between the landlord's and the tenant's interests. The UK has the most active property market in Europe. We cannot see how the introduction of new restrictions will encourage this highly dynamic market." Rouse said the proposals could see reviewed rents fall below original rents set by developers and therefore deter them from building new properties. He said the Government was not proposing any measures to safeguard this, and unless a sensible framework was established, investment in the hotel market could be severely impacted. The Office for the Deputy Prime Minister published a consultation paper concerning options for deterring or outlawing the use of upward-only rent review clauses for commercial property leases earlier this month. It stated that upward-only rents might impede economic recovery during a slowdown and were potentially damaging to the competitiveness of the UK economy. The consultation is open until 30 September. Copies of the paper can be downloaded from [www.odpm.gov.uk. *Source: Caterer & Hotelkeeper magazine, 17 June 2004*
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