Nearly 70% of available supply is Grade A quality
Savills requirement data shows an upward trend for London and the South East, which, together with the amount of space under offer, points to an expected increase in transactional activity in H2 2025
Toby Green, National Head of Industrial and Logistics
PLP Milton Keynes, where PLP, advised by Savills has recently let 530,000 sq ft across two units
Supply
Over the past twelve months, supply in London and the South East has risen by 18% to now stand at 13.64 million sq ft across 77 units. This increase can be largely attributed to speculative development completions and the return of second-hand Grade A stock to the market. The combined vacancy rate across the region now stands at 9.88%, up 190 basis points (bps) year-on-year (YoY), with the Inner M25 vacancy rate at 8.58% and the South East at 10.39%.
In terms of unit count, there are 56 units within the 100,000–200,000 sq ft range, 15 units within the 200,000–300,000 sq ft range, three units within the 300,000–400,000 sq ft range, two units within the 400,000–500,000 sq ft range, and one unit over 500,000 sq ft. The market for units over 500,000 sq ft is constrained, with only 0.54 years’ worth of supply available.
When analysing the current supply by grade, 49% of available space is Grade A speculative development in comparison to 39% nationally, with 20% of second-hand Grade A space compared to 22% nationally, 18% of Grade B space compared to 16% nationally, and 13% of low-quality Grade C space compared to 23% nationally.
Grade A space now accounts for nearly 70% of available supply. This rise in best-in-class space is due to 2.56 million sq ft of speculative development and 1.33 million sq ft of second-hand Grade A stock coming to the market over the last twelve months. Of the speculative development space, over 1.12 million sq ft of this new space was added in the North West (M40–A1) Corridor. With an occupier preference for best-in-class units, the London and South East market is poised to meet demand.
There is currently over 3.3 million sq ft of space under offer across four units, with 3.2 million sq ft of this space being Grade A. If these significant transactions were to complete in 2025, transactional activity would be at its highest level since 2022, suggesting occupiers are still looking to take space despite recent geopolitical and economic uncertainty.
Take-up
In H1 2025, take-up totalled 1.43 million sq ft across eight transactions, up 17% on H2 2024 and an 11% decline on H1 2024. All transactions occurred within the South East, with no deals over 100,000 sq ft inside the M25 since Q4 2023. However, there is currently one existing unit under offer inside the M25, which shows some signs of life in the region, with our in-house Savills requirements index showing an upward trend for London and the South East.
When analysing transactional activity by grade, 58% of space transacted was Grade A speculative development in comparison to 33% nationally, and 33% was second-hand Grade A compared to 43% nationally. There was no Grade B space transacted in the region compared to 13% nationally, and 9% of space transacted was low-quality Grade C compared to 11% nationally. This shows that 80% of the space leased was Grade A in London and the South East, which reinforces the occupier preference for best-in-class assets.
In H1 2025, 12% of space transacted was BTS, down significantly on H2 2024. 58% was new speculative development, which has more than doubled since H2 2024, with the remaining 30% involving second-hand space.
In terms of size ranges, there were six transactions in the 100,000–200,000 sq ft range, on par with H1 2024, one transaction in the 200,000–300,000 sq ft range and one transaction in the 300,000–400,000 sq ft range. There were no transactions over 400,000 sq ft in H1 2025.
In H1 2025, four sectors comprised the bulk of transactional activity, online retailers accounting for 40% of transacted space, followed closely by 35% from manufacturing companies, 14% from third-party logistics (3PLs) and 11% from food producers.
Development pipeline
Currently, there are twelve units under construction across London and the South East, totalling 1.8 million sq ft. Of those under construction, eleven units are in the 100,000–200,000 sq ft size range, and one is in the 200,000–300,000 sq ft size range. With no units over 300,000 sq ft currently under construction, the market is undersupplied, which creates opportunities for developers to refurbish existing stock or break ground on speculative development projects.