The UK logistics market outlook

The UK logistics property market outlook describes where demand, rent, supply and investment are heading for warehouse and distribution space across the country. After the extraordinary surge of the early 2020s, the market has settled into a more measured phase, and understanding that shift matters for anyone buying, building or funding logistics property. We arrange and introduce property finance rather than lend ourselves, so we read the outlook closely, because it shapes how lenders price risk and how investors judge whether a warehouse purchase still stacks up.

This guide sets out the current state of the UK logistics market, the forces driving it, how the regional picture differs, the key trends to watch and the main risks ahead. We have written it for investors, developers and owner-occupiers weighing a move in the warehouse and distribution sector, and we have grounded every claim in real figures from the major agents so the outlook rests on evidence. Throughout we link the national picture back to the regions, because the headline numbers conceal a market that behaves very differently from one corridor to the next.

What is the current state of the UK logistics market?

The UK logistics market has shifted from frenzy to stability. Take-up reached around 40.8 million square feet in 2025 on a 50,000 square foot and above basis according to Knight Frank, with the big-box segment of 100,000 square feet and above at roughly 33 million square feet according to Savills. That is a healthy, functioning market rather than the record-breaking pandemic years, and it reflects occupiers taking space steadily to serve real demand rather than racing to secure capacity at any cost.

Rent has kept rising even as activity has normalised. Prime big-box logistics rent reached around £11.90 per square foot in mid 2025, up 5.2 percent year on year according to Colliers, which shows that well-located warehouse space remains in demand and that landlords still hold pricing power on the best stock. The combination of steady take-up and continued rental growth is the signature of a maturing market that has found a sustainable level after a period of exceptional growth.

Vacancy is the one figure that signals the change of phase. Vacancy rose to about 7.5 percent against a 10 year average near 4.6 percent, so occupiers now have meaningfully more choice than they did at the peak. That higher vacancy is not a crisis; it is a return toward balance after years of acute shortage, and it gives occupiers room to negotiate while still leaving prime, well-located stock tightly held. The market is looser than it was, but it is far from oversupplied.

The composition of that vacancy matters as much as the headline rate. A large share of available space sits in older or second-hand buildings, while genuinely modern, well-located stock remains scarce, so the figure overstates how much real choice an occupier seeking a quality unit actually has. This is the same prime-versus-secondary divergence that runs through the whole market, and it means the headline vacancy rate should be read as a signal of normalisation rather than of weakness. For investors in good stock, the picture is more reassuring than the single number suggests.

What is driving the logistics market in 2026?

The biggest single shift in demand has been the rise of manufacturing as an occupier. Manufacturing became the largest single occupier type of UK industrial and logistics space in 2025 at around 33 percent of take-up according to Savills, ahead of retail, wholesale and pure e-commerce. This reflects reshoring, a desire to hold more stock onshore and a structural change in who needs warehouse and industrial space, and it broadens the demand base beyond the online retail that drove the previous cycle.

Constrained supply is the other defining force. Development completions fell to roughly 16 million square feet in 2025, the lowest since 2018 according to Knight Frank, as higher build and finance costs slowed the speculative pipeline. Fewer new buildings mean that, even with vacancy above its long-run average, genuinely modern, well-located stock stays scarce. That scarcity supports rent and value on the best assets and is a large part of why prime yields have held firm rather than softening.

Investment demand has steadied alongside the occupational market. Prime industrial yields held broadly stable at around 5.00 to 5.25 percent according to Knight Frank in December 2025, with secondary nearer 6 percent, which tells you investors remain confident in the sector's income and growth prospects. Stable yields, continued rental growth and a thin development pipeline together create the conditions for a measured but positive 2026, in which the best logistics property continues to attract both occupiers and capital.

How does the regional logistics picture differ?

The national figures mask sharp regional differences, and the Golden Triangle in the Midlands sits at the top of the hierarchy. As the prime national distribution location, with four hour heavy goods vehicle reach to around ninety percent of the UK population, the Midlands corridor commands the highest rents and the keenest yields and stays tightly held even as national vacancy rises. Demand for large distribution sheds concentrates here, so the corridor tends to outperform the wider market on both rent and value.

Beyond the Midlands, the regional story varies with local supply and demand. The South East and London urban logistics market is constrained by a chronic shortage of land, which keeps rents high and vacancy low for the limited stock available. Northern and other regional markets offer more space and lower rents, with performance tied closely to local occupier demand and to how much speculative development has recently completed. A market with a glut of new sheds will show higher vacancy and softer rents than one where supply has stayed tight.

This regional spread is exactly why the national outlook has to be read locally. A warehouse in the Golden Triangle or in supply-starved London behaves very differently from one in a region with surplus new stock, and the rent, the void risk and the yield reflect that. When we arrange finance, we always test the specific corridor rather than the national average, because a lender prices what it can re-let in that location, and the regional picture is often the difference between a keen loan to value and a cautious one.

The recent pattern of speculative development adds a further regional wrinkle that is easy to miss. Some regions saw a wave of new units complete just as demand cooled, leaving them with higher vacancy and softer rents, while others stayed tightly supplied throughout and held their pricing. So two markets can show very different conditions today not because their underlying demand differs greatly but because of how much building happened to land in each over the last couple of years. Reading the local supply story alongside the local demand story is essential to judging where rent and value are actually heading in any given corridor.

What are the key trends and opportunities to watch?

Rental growth is the trend to watch most closely. UK logistics rental growth is forecast at around 2.7 to 2.9 percent for 2026, a marked slowdown from the double-digit increases of the early 2020s but still positive and still ahead of many other property sectors. For investors, that means income should continue to grow, supporting both rent reviews and capital value, while for occupiers it signals that the cost of warehouse space will keep rising gradually rather than spiking. Modest, sustainable growth is the realistic expectation for the year ahead.

The thin development pipeline is both a trend and an opportunity. With completions at their lowest since 2018, the shortage of genuinely modern, well-located buildings creates an opening for developers who can deliver the right stock in the right corridor, and for investors holding existing prime assets that face little new competition. Manufacturing demand, urban logistics and the emergence of niche segments such as industrial outdoor storage all add further opportunity for those willing to look beyond standard big-box space.

Energy efficiency and building quality are an increasingly important trend underneath the headline numbers. Occupiers and investors alike are placing more weight on modern, efficient buildings, and older stock that cannot meet rising standards risks falling out of favour and widening the gap between prime and secondary value. For anyone funding logistics property, the quality and adaptability of the building is becoming as important as the location and the lease, because it bears directly on how the asset will let and value over the term.

What are the main risks facing logistics property?

The clearest risk is that elevated vacancy weighs on weaker stock. With vacancy at about 7.5 percent against a 10 year average near 4.6 percent, occupiers have more choice, and older or poorly located buildings may take longer to let and may see rents soften. The risk is concentrated in secondary stock rather than prime, which stays scarce, but it means the gap between the best and the rest could widen, and investors in weaker assets need to plan for longer voids and possible refurbishment cost.

The cost of finance remains a swing factor for the whole sector. Logistics values are sensitive to interest rates, because cheaper borrowing lets investors pay more for the same rent and dearer borrowing does the reverse. While prime yields have held broadly stable at around 5.00 to 5.25 percent on the Knight Frank December 2025 figures, any renewed move in rates would feed quickly into values and into the loan to value lenders are willing to offer. Funding cost is therefore a risk that sits behind every logistics investment decision.

Our role is to help clients weigh these risks honestly against the opportunity. We test each deal against the specific corridor, the building quality and the current cost of finance, and we are candid about whether a purchase or development stacks up in this more measured market. Because we arrange and introduce rather than lend, we have no incentive to talk up the sector; we simply want the finance to fit the asset and the outlook, so the logistics property you fund still works for you through whatever the next phase of the market brings.

What does the outlook mean for financing logistics property?

A stabilising market is, on balance, a good backdrop for finance. Lenders are most comfortable when values are predictable, and the combination of stable prime yields around 5.00 to 5.25 percent on the Knight Frank December 2025 figures, continued rental growth and a thin development pipeline gives them confidence that good logistics stock will hold its value. That confidence translates into willingness to lend at a sensible loan to value against well-located warehouse and distribution assets, which is the practical benefit of the current outlook for anyone funding a purchase.

The caveat is that the outlook is far less generous to weaker stock. With vacancy at about 7.5 percent against a 10 year average near 4.6 percent, lenders are more cautious about older or poorly located buildings that could take longer to let, and they will size the loan and set the rate to reflect that risk. The gap between how lenders treat prime and secondary assets has widened, so the same headline outlook can mean a keen loan to value on one building and a guarded one on another a few miles away. Location, lease and building quality decide which side of that line a deal falls.

Development finance deserves a separate word, because the thin pipeline is partly a finance story. Higher build and borrowing costs slowed the speculative development that would normally have followed strong demand, which is why completions fell to roughly 16 million square feet in 2025, the lowest since 2018 according to Knight Frank. For a developer who can fund and deliver the right stock in the right corridor, that scarcity is an opportunity, but the finance has to be structured carefully around the cost, the build timeline and the projected rent on completion in a market where rental growth has slowed to around 2.7 to 2.9 percent.

This is where we add the most value in the current phase. Rather than a client testing the market through a single lender that may be cautious on logistics, we read which funders are active, where their appetite sits and how they are pricing the sector's risk, then place the case where it is most likely to complete on terms that work. Because we arrange and introduce rather than lend, our judgement on the outlook is offered to help the client decide, not to push a product, and that independence matters most when the market is balanced rather than booming.