Small and medium‑sized enterprises (SMEs) are widely recognised as the backbone of the UK economy. They account for over 99% of all businesses and employ more than half of the private‑sector workforce. Yet one of the most fundamental enablers of their success remains largely overlooked: access to the right kind of space.
Research by Savills and Potter Space highlights the crucial role played by Industrial and Logistics (I&L) units below 100,000 sq ft, while also revealing a decade‑long undersupply of this space across the UK. This particularly constrains SME growth, productivity, and innovation at a time when the economy can least afford it.
Despite its importance, the sub-100,000 sq ft I&L sector remains supply-constrained. Availability has sat below long-term equilibrium levels for over a decade, while inventory growth has lagged behind larger I&L units.
This shortage of space has led to significant suppressed demand, where businesses want to expand or relocate but are unable to do so because suitable premises simply do not exist. It is estimated that meeting this demand could have facilitated 48,000 jobs and £3.3bn of Gross Value Added (GVA) to the economy over the period 2014 to 2024.
In addition, rising energy costs and looming energy efficiency standards further compound the challenge for SMEs occupying older stock.
The implications extend far beyond individual businesses. SMEs operating in the I&L sector are integral to the supply chains across advanced manufacturing, clean energy, life sciences, digital technology and the creative industries – all priority growth sectors identified within the government’s Industrial Strategy.
If SMEs cannot access the space they need, the UK’s ambitions for productivity, innovation, and regional growth are at risk.
Smaller I&L premises can be located in and around city centres, within business parks, and within larger, strategic schemes, meaning the benefits of investment and job creation are more evenly distributed across the country. By contrast, 74% of new office development since 2020 has been concentrated in just 10 city centres.
Reflecting this broader geographic spread, the sub-100,000 sq ft I&L sector accordingly makes an impressive contribution to business rates revenues across the country (around £4bn per annum), helping local authorities and central government to provide day-to-day services for businesses and residents.
In regions such as the East of England, North West, and West Midlands the sector contributes over £400m per annum, whilst in London this figure is over £650m, equating to 82% of the total contribution from the I&L sector in the capital.
To unlock the potential of the small to mid‑box sector, a coordinated approach is needed across planning committees, councils, mayoral authorities and national policymakers to recognise the sector not as a competing land use, but as part of a wider strategy for economic development. This requires better tools, starting with Employment Land Reviews that properly account for suppressed demand.
This report was presented at UKREiiF 2026 during the Potter Space and Savills ‘Big Things in Small Boxes’ breakfast event.
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