Occupiers taking stock
Mountpark Hinckley, where Tesco, advised by Savills, has leased a 491,926 sq ft unit
The first half of 2025 has seen the logistics market faced with numerous challenges, some of which were foreseen, however, some were not!
The impact of Trump’s tariffs, at first seen as cause for concern in the logistics market, decisions being delayed and concern on further rising costs on top of the effects of the Autumn Budget baring its teeth, suggested that the market could be headed towards a period of stagnation. Borrowing costs remaining high, consumer confidence down, and a rise of speculative development reaching completion, but vacancy space continuing to rise. This said, the first half of the year can be defined high level as ‘Tariffs, Planning, Power and Programme’.
The logistics market has again proved steady, with take-up at 14.71 million sq ft for H1 2025, a fall of 9% from H1 2024 but above 2023’s figures. The cause here can be twofold: the impact of the Autumn Budget now in motion, businesses having to consider the additional costs for operations along with an upcoming rates revaluation and then the wider political and global uncertainty of tariffs and conflicts. We are seeing an increased number of projects considering a ‘stay vs go’ analysis, occupiers again seeking the most risk-free approach, but considering their own business targets/strategy.
Most telling in the take-up to date is the fall of the BTS market, making up only 2.77 million sq ft in H1 2025. This is the lowest for over a decade and a reflection of the unstable funding market, but also timing to secure deliverable sites with sufficient utilities to give confidence to programme. We see this trend continuing in many locations in the UK, with investor appetite moving away from single long let distribution centres and moving towards capturing reversion. This is continuing to leave occupiers in a grey area, to either commit to a BTS at potentially higher cost and with uncertainty on third parties performing, pause on their development plans or compromise and consider existing / under construction spec buildings.
The 3PL market has continued to be the majority of sector take-up in the logistics market, accounting for 41% of take-up in H1. This has been underpinned by major lettings to GXO in Avonmouth and ID Logistics in Sherburn, c.1.4 million sq ft across two buildings, but both servicing Amazon contracts. Speed of transaction has been a theme so far for 2025, with Supersmart treating and exchanging in a matter of weeks, the latter due to the effects of the Trump tariffs, but with further requirements rumoured to be coming forward, we must assume this is a longer-term investment and strategy play.
To date, 7.31 million sq ft of second-hand space has been taken up in H1 2025, up 49% versus H2 2024. To the points raised previously, occupiers in some instances may have had to compromise on a new purpose-built space, but also, where required, existing stock is available, and occupiers require a shorter preparation period to ‘go live’ – therefore, the location and availability analysis becomes even more key to service customers. The sentiment remains that a well-specified building that is well refurbished will continue to attract occupiers to buildings and those continuing to move towards best-in-class, but the timing for availability and, in turn, occupation, are more key than ever.
ESG for occupiers remains high on decision-making and requirements, which will continue to lead towards occupiers requiring best-in-class, both to their investors and their customers. Best-in-class property creates the opportunity to enhance the occupiers' offering to their employees and to retain staff, and the ability to attract and retain new staff. This is becoming more apparent than ever, particularly if occupiers are pausing long-term and costly automation projects.
The increased public announcements relating to the defence sector, we feel, create opportunity to the UK Logistics market. This, though, must be tempered in that defence sectors are not necessarily located in logistics hotspots, e.g. the Golden Triangle. This gives the opportunity for this sector to consider and recognise value in Freeports. Many of these sites are linked to seaports, therefore an opportunity for the defence sector to invest and see the benefits the Freeports bring. Subject to delivery and confidence of programme, we believe freeports will have further attention from the defence sector, and with further increase of nearshoring and friendshoring, we see this continuing to grow.
Encouragingly, from both a statistic and sentiment perspective, seeing further development 9.14 million sq ft proposed and 10.3 million sq ft of Grade A units now reaching PC, this continues to give occupiers choice but will be dependent on location, specification and opportunity.
With a continued wide variety of occupier sectors considering space in the UK, either by consolidation, expansion or new investment into the UK, there is positive sentiment, albeit to be caveated with headwinds with wider geopolitical uncertainty. With the 90-day pause on tariff negotiations ending in September, occupiers will have to consider their options, either lease event or business-led – this gives us a short timeframe to see whether the next moves will be proactive or reactive.