This time last year, we were looking ahead to a new US presidency and evaluating what impact the first Budget of the new Labour government would have on the industrial and logistics market. We were also discussing the likely path for inflation and base rates and how that may impact the market. Twelve months on, and much of the same situation prevails, with the latest UK Budget reducing some short-term uncertainty but pushing some more difficult tax and spend issues to the end of the current parliament, and US-driven changes in trading arrangements becoming normalised.

One of the less exciting but, in our view, most important changes in the latest Budget was the commitment to having only one fiscal event per year, rather than two. This puts the UK in line with its peers and removes one of the short-term reasons to delay decision-making on transactions. There is no doubt that our economy has its challenges, and forecasters expect that economic growth will be weaker in 2026 than 2025, but this is not unique to the UK. Our peers across Europe and Asia are equally challenged by demographic change and weak productivity growth. Even when we turn to things that the Chancellor can affect, the story isn’t particularly negative, with the UK having the second-lowest debt-to-GDP ratio in the G7.

2026 should see a rising recognition that the UK is in a comparatively good place, and the immediate reaction of the bond markets to the latest Budget suggests that they are happy that it was fiscally responsible. However, it is not all rosy in the garden, and the back-ending of many of the tax rises and the harshest of the spending controls suggest that the Chancellor is hoping for more economic growth than many are predicting.

Many of the policies outlined in the Budget will certainly give occupiers further things to consider, such as rises in the minimum wage and increases in business rates, particularly for larger units, albeit the bark was worse than the bite on this point.

Turning to more global issues, the impact of US trade tariffs has, thus far, had limited direct impact on the market, with the impact being more keenly felt in business and consumer confidence. Barring a possible trade confrontation with China, we expect that things will settle down into a predictable rhythm when it comes to trade.

An area of growth for the market in the latter half of the decade will come from the Defence sector, as referenced by our recent research, which highlights that we expect close to 400 million sq ft of additional demand from this sector across Europe as European NATO countries increase their defence spending. The early signs are that there is some credence to our projections, with 2025 being a record year for defence-related take-up at 3.8 million sq ft, comfortably ahead of the long-term average level of 1.7 million sq ft per year.

Online retail remains a key driver propelling the market forward. Indeed, the latest data from the ONS on online retail penetration shows that for November 2025, penetration reached 32.4%, the highest level since November 2021, when some Covid-related prevention measures remained in place. Indeed, retail industry bellwether Next highlighted the continued importance of its online channels, which delivered 8.8% growth in 2025 versus physical stores at 3.5%. All in, despite reasonable concerns about the cost of living, tax rises, and pressures on the labour market, the UK consumer is not showing any obvious signs of flagging, which is obviously good news for the logistics market.

Take-up

With all of the above in mind, it is therefore pleasing to report that take-up for 2025 was the strongest year in the last three and comparable to any of the strongest years prior to 2020. Indeed, at a national level, take-up for 2025 has reached 33.41 million sq ft, an increase of 14% on 2024 and 29% ahead of the pre-2020 average.

Total deal counts also increased year-on-year (YoY) and reached 140, a 13% improvement on 2024. And whilst the average deal size increased from 236,021 sq ft to 239,007 sq ft, the growth mainly came from an increase in smaller unit take-up under 300,000 sq ft, which reached 18.6 million sq ft.

Interestingly, and perhaps unsurprisingly, given the uncertainty around the Budget in November, Q4 was the weakest quarter of the year, coming in at 6.7 million sq ft. However, we are tracking 6.2 million sq ft of space under offer, which should mean that 2026 starts with some momentum.

Despite a rebound in BTS deals in Q3, including M&S committing to 1.3 million sq ft at DIRFT, 2025 was another stagnant year for the BTS market, with total take-up reaching 9.99 million sq ft, a small 8% rise from 2024, but still some way off the 15.3 million sq ft a year the market became used to in the five years leading up to the pandemic. Historical trends do suggest, however, that as supply rises, BTS take-up falls as occupiers turn to existing supply, which, in some cases, may be available on more favourable terms when compared to BTS options.

Whilst the take-up of second-hand units reached its highest level since 2021, occupiers' preference for Grade A units remained firmly in place, with 78% of take-up being for such units. The fact that second-hand unit take-up can rise alongside such a high level of Grade A take-up suggests that the overall quality of units in the total market inventory is increasing.

We continue to see diversification of the tenant mix and a diverse range of occupiers taking space, with 140 different occupiers taking space in 2025.

Manufacturing-related companies accounted for 33% of the market at 10.6 million sq ft, which was up 8% YoY, thereby giving further evidence to the near/re-shoring trend. 3PLs also remained active, taking 10.4 million sq ft, up 57%, and certainly helped by a number of 3PLs taking space to service Amazon contracts. 2025 also saw traditional high street and grocery retailers increase their take-up by 16% to reach 3.7 million sq ft.

Supply

Despite the strong levels of take-up this year, the combination of 16.8 million sq ft of speculative completions in 2025, second-hand supply rising by 2.4 million sq ft — although it’s worth noting this is down from 8.72 million sq ft last year — and negative net absorption in the first half of the year has resulted in total supply rising to 63.85 million sq ft across 298 units. This reflects a vacancy rate of 7.78% and the highest level of supply since 2011.

No region or size band has been immune to this rise in supply, and 58% of the total supply is considered Grade A. Whilst 2025 saw the take-up of speculatively constructed space increase by 2.4 million sq ft, that hasn’t been enough to alter the supply trajectory for brand new buildings, which now stands at 24.3 million sq ft.

We are, however, tracking 24 units that are under offer to occupiers, and should these deals complete, this will result in supply decreasing to 57.6 million sq ft.

Moving forward, 6.1 million sq ft of space is under construction speculatively, which will be added to the total supply throughout 2026 and into 2027, with a further 1.3 million sq ft being marketed and committed to starting on-site throughout 2026.

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