Funding a ground-up logistics scheme

Funding a logistics scheme means assembling development finance that pays for the land, the build and the professional fees of a warehouse or distribution project, and then refinancing or selling the finished asset. The structure rests on loan to cost and loan to gross development value, staged drawdowns and a clear exit, and it is tailored to the strong investment demand for modern logistics space. We arrange this finance for industrial and logistics developers across the UK, and as an introducer rather than a lender we place each scheme with the funder whose appetite genuinely fits it.

This guide explains what logistics means in a finance context, what a logistics developer actually does, and how the funding for a scheme is put together from the senior development loan through to the exit. We frame the decision around the investment case for industrial property, because the appetite of lenders and the rents that drive the gross development value both follow from how investors view the sector. The aim is to give a developer a clear map of how a logistics scheme is funded from bare site to finished, lettable building.

What is logistics in a finance context?

In a finance context, logistics refers to the property and infrastructure that move and store goods: warehouses, distribution centres, fulfilment units and the industrial estates that house them. As an asset class, logistics has become one of the most sought-after forms of commercial property investment, because the growth of online retail and the reshaping of supply chains have driven steady demand for modern, well-located space. That investment demand is what underpins the values that development finance is lent against.

Logistics development finance is therefore a specialist application of development finance aimed at building these assets. The lender funds the construction of a warehouse or distribution unit and is repaid when the finished building is sold to an investor or let to an occupier and refinanced. The strength of the sector matters to the funding because it supports the gross development value, and a lender lending against a constrained, in-demand market will take more comfort than one lending into an oversupplied one.

The supply picture reinforces the case. UK logistics development completions reached around sixteen million square feet in 2025, the lowest figure since 2018 according to Knight Frank. A constrained pipeline of new space tends to support rents and values for the schemes that do complete, which is exactly the dynamic that makes lenders and investors willing to fund well-located industrial development.

What does a logistics developer do?

A logistics developer identifies a site, secures planning consent for warehouse or distribution use, and manages the construction of the building through to practical completion. They assemble the land, the design team and the contractor, model the project costs and the end value, and arrange the development finance that funds the work. Their return comes from the gap between the total cost of delivering the scheme and the value of the finished asset, whether that value is realised by selling to an investor or by letting and holding.

The developer's central judgement is whether the finished building will command a rent and a value that justify the cost and risk of building it. That judgement drives every funding decision, because the loan to gross development value ceiling is set by the end value the developer is forecasting. A developer who can evidence strong demand, a good location and a realistic rent will support a larger facility than one relying on optimistic assumptions.

Many logistics developers run a portfolio of schemes and recycle their equity from one project into the next, often using development exit finance to release capital from a completed building before it has fully sold. This is where the investment discipline of the developer and the lending discipline of the funder meet: both are ultimately betting on the same end value, and the funding is structured so that the developer carries the equity risk and the lender carries a capped, secured share of the cost.

How is a logistics scheme funded from site to completion?

Funding a logistics scheme starts with a senior development finance facility sized by the lower of loan to cost and loan to gross development value. On a scheme costing five million pounds with a forecast GDV of five million six hundred thousand pounds, a facility at the lower of seventy percent loan to cost and sixty-two percent loan to GDV lands at roughly three and a half million pounds, with the developer contributing the balance as day-one equity, weighted towards the land.

The money is then released in staged drawdowns as the build progresses, each one signed off by a monitoring surveyor who confirms the work has been done and the remaining budget is still enough to finish. Interest is charged only on the funds drawn and is usually rolled up, so it accrues on a rising balance through the build and is settled at the end rather than serviced monthly. This keeps cash free during construction, when the scheme produces no income.

At practical completion the facility is repaid through the exit. A developer selling the building uses the sale proceeds. A developer holding it lets the space, establishes the income and refinances onto an investment term loan, sometimes via a development exit bridge to buy marketing time first. The whole structure, from the senior loan through the drawdowns to the exit, is built around the moment the bare site becomes a finished, lettable logistics asset.

What lenders fund logistics development, and what do they look for?

Logistics development is funded by specialist banks, mainstream banks with a real estate appetite, and non-bank lenders backed by institutional money. Each occupies a different point on the spectrum: a mainstream bank may offer the keenest rate to an experienced developer with a strong scheme, while a non-bank lender will consider a more complex deal or a higher loan to cost in exchange for a higher rate. The right home for a scheme depends on the developer's track record, the strength of the location and the margin between cost and end value.

What every lender looks for is much the same. They want a credible end value supported by evidence of demand, a realistic budget with genuine contingency, an experienced team or a strong contractor, and a clear, deliverable exit. The investment case for the finished asset sits at the centre of all of this, because a lender funding a logistics scheme is ultimately lending against the rent and value an investor will pay for the completed building.

This is where working through an arranger pays off. We see which lenders are actively funding logistics development, which have paused, which are quick and which are cheap, and we match the scheme to the funder whose criteria genuinely fit. Rather than a developer applying to one bank, being declined and starting again, we read the market and place the case once with the lender most likely to fund it on sensible terms, protecting both time and the developer's margin.