[2025] UKUT 163 (LC)

Surprisingly, neither party, in either of their reports, had considered whether it was appropriate to adjust the rents at the Property or at Amazon Swallowdale Lane, for the effects of rental growth to the AVD. We would have been assisted by evidence about the state of the market at the time in Hemel Hempstead but we observe that all of the other distribution warehouses in the locality were occupied when the lease for the Property was agreed and there was no significant new supply until 2019 when the Blossom Way units were completed. The letting at the Property was completed in the space of seven months, perhaps indicating that distribution warehouse floor space was in short supply. The parties adduced the barest minimum of detail about the other transactions in the locality and without the knowledge of how the rents were arrived at we think it would be unwise to accord them much, if any, weight.

Comparison of the 2014 headline rent and the 2019 rent review at the Property reveals a difference of 26.18%. A similar level of growth is evident in the Amazon Swallowdale rent which grew by 25.0% between the 2013 letting and the commencement of the subsequent lease in 2019. Mr Hawkins acknowledged at the hearing that ‘markets fluctuate’ and Mr Steel admitted that when considering the letting evidence some rental growth was implicit in the tone of £67.50 per m².

Whilst it is evident that rents grew strongly between 2013 and 2019 we have no evidence to show exactly when that growth took place. The similar relative growth shown at the Property and Amazon suggests that the market was flat between October 2013 and July 2014 and it would have been very unlikely to have grown significantly in the nine months that followed. We are inclined to the view therefore that the two lettings demonstrate that the rent for the Property, on the basis that the statute defines, should be based on a figure of £65.71 per m², which we round to £65.75.