Year-end transaction volumes totalled £8.47 billion, representing a 35.5% increase on 2023. In the fourth quarter, there was a significant resurgence in transactions, particularly of larger lot sizes, leading to a strong close to the year. Total transaction volume in the final three months of the year reached £4.11 billion, nearly half the year’s total volume.

Looking forward, the industrial and logistics sector continues to be a compelling investment opportunity for investors across the risk spectrum, attracting a significant amount of capital. This influx of new investors should contribute to maintaining stable transaction volumes as we progress through 2025. However, it is important to acknowledge that various factors could influence liquidity in the market.

The occupational story

Although demand remains strong and take-up in 2024 remained above the pre-pandemic average, supply is continuing to increase. This has led to vacancy rates in the Big Box market reaching 7.18%, a level not observed since the aftermath of the Global Financial Crisis. While this trend may raise concerns among investors, it is important to note the significant variation across the UK, with several regions experiencing quarter-on-quarter vacancy rate declines. What’s more, the reduced development pipeline, and the repurposing of land designated for industrial and logistics towards data centre development, suggest that this issue is likely to be temporary.

As a result, investors appear willing to overlook some of the perceived weaknesses in the occupational markets. While investors and funders will need to approach speculative development with continued caution, the need to deploy capital remains a top priority.

Volatility remains a consideration

Despite a strong fourth quarter, the positive momentum has been somewhat curtailed. Since the start of the year, the UK gilt rate has undergone considerable volatility, driven by multiple factors, including changes in global economic conditions, shifting inflation expectations, and the monetary policy outlook of the Bank of England. 

Market sentiment regarding potential future interest rate movements has resulted in fluctuations in gilt yields, highlighting concerns about economic resilience and inflationary pressures. Consequently, investors have had to navigate these uncertainties, leading some to engage in a temporary period of reassessment.

Rental growth prospects

In 2025 we anticipate that investors will concentrate more closely on sub-market rental growth prospects. With supply increasing and take-up returning to historical norms, we are observing longer average vacancy periods. We expect rental growth of between 3.1% and 4.1% per annum to 2028, albeit with significant regional variation as highlighted in our recent Big Shed Prospects report.

While a 4.1% rental growth rate is still robust, we should not expect substantial outperformance unless vacancy rates tighten and market pressures intensify.

Outlook

Overall, despite facing certain challenges, the investment outlook remains bright. Currently, we assess prime yields to be 5% for both multi-let estates and single-let logistics, though there is particular downward pressure on the multi-let sector. Ultimately, despite various factors at play, the continued capital inflow targeting the sector looks set to compress yields as the year progresses.

Further information

Contact Charlie Foster

National Investment