For years, turnover rent sat firmly in the retail and hospitality box. If you heard “percentage rent”, you thought shopping centres, outlet schemes, pubs, bars and restaurants.
That’s changed (or at least changing).
Across the UK market, turnover structures have moved from being a short-term fix to something much more mainstream. What started as a way to bridge valuation gaps and help retailers through uncertain trading conditions is now a regular part of the leasing conversation in retail, leisure, energy and hospitality. In some corners, it is even creeping into office discussions.
At its simplest, turnover rent links some or all of the rent to the tenant’s performance. Instead of paying a fixed market rent come what may, the occupier pays a base rent plus a percentage of turnover, or in some cases purely a percentage of turnover.
It sounds straightforward. It rarely is.
What we’re seeing in practice
A lot of UK deals now follow a hybrid model:
- A base rent, usually set lower than a traditional open market rent
- A percentage top-up if turnover exceeds an agreed threshold
- Detailed turnover reporting obligations
- Audit rights for the landlord
Pure turnover leases do exist, but lenders and investors are generally more comfortable where there is at least some guaranteed income.
In retail parks and shopping centres, this approach is now well established. Landlords accept that if a tenant trades well, they should share in the upside. Tenants value the safety net if trading dips. In the right scheme, it aligns interests quite neatly.
But the commercial logic only works if the drafting does too.
Where the arguments usually sit
The biggest issue is defining “turnover”.
- Does it include click and collect?
- What about online sales fulfilled from store stock?
- Are returns deducted, including online returns?
- What about VAT, staff discounts or group company transactions?
With online and in-store revenue so closely intertwined, it’s no longer something you can cover with a few generic lines.
Then there are audit rights. Landlords need comfort that the figures are accurate. Tenants are understandably protective of sensitive financial data. Getting that balance right can take time.
You also need to think about how turnover rent interacts with the rest of the lease. For example:
- Is the break conditional on payment of base rent only, or all turnover rent?
- How does it sit alongside a service charge cap?
- What happens on assignment to a weaker covenant?
These are the sorts of points that are easy to gloss over at heads of terms stage and much harder to fix later.
From an investment perspective, turnover rent introduces variability. Valuers can no longer just capitalise a fixed income stream. They need to model trading scenarios. Lenders are increasingly used to that, but appetite varies depending on sector and strength of covenant.
Not just retail and restaurants
Turnover rent is well embedded in:
- Restaurants and food operators
- Cinemas and competitive socialising brands
- Gyms and fitness operators
- Family entertainment and leisure concepts
In those sectors, the building itself drives income. If the scheme is busy and well curated, everyone benefits. That makes performance-based rent easier to justify.
This is particularly relevant in mixed use developments where landlords are actively managing a destination rather than simply collecting rent.
And what about offices?
Turnover rent is still rare in traditional office leasing. Most professional services firms and corporates do not generate revenue directly from the premises in a way that can easily be measured.
That said, this is something I recently discussed when speaking on a panel at the South Coast Commercial Property Show back in November 2025. The idea is starting to surface more often.
There are certain office-based occupiers where it at least makes commercial sense to explore it, for example:
- Flexible workspace and serviced office operators
- Co working providers
- Innovation hubs and incubators
- Training providers
- Private healthcare and diagnostic operators
- Call centres or outsourced service businesses
- Creative studios
In those cases, income is closely linked to occupancy or services delivered from that specific building.
The problem is definition.
Are you linking rent to:
- The company’s overall turnover?
- A specific division?
- Revenue attributable to that office?
Modern businesses operate across multiple sites with shared systems and hybrid working. Allocating revenue neatly to one building can be messy. If you tie rent to overall company turnover, the landlord takes exposure to parts of the business that may have nothing to do with the premises. If you narrow it too far, you risk arguments about attribution and accounting.
For that reason, turnover rent in offices is most likely to work where the occupier is effectively running an operational business from the building, rather than simply using it as workspace.
So Is this the new normal?
Turnover rent is not going to replace traditional open market rent across the board. Fixed income still has obvious appeal, particularly for funded investments.
But it is no longer a niche concept. In retail and leisure, it is firmly part of the toolkit. In operational real estate and certain office sub sectors, it is being explored more seriously.
Ultimately, it comes down to risk and alignment. Are landlord and tenant prepared to share trading performance, both good and bad? If so, turnover rent can be a sensible structure. If not, it can create more complexity than it solves.
For those of us drafting the leases, the key is to properly understand how the occupier’s business actually works. Without that, turnover rent clauses can quickly become theoretical, or worse, unworkable.
The UK leasing market has become more creative over the past few years. Turnover rent is one of the clearest signs of that shift.
How Moore Barlow can help
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