Diversified demand and strategic commitments define 2025.
Savills advised on the acquisition of City Box 120, a last-mile logistics unit located at City Cross Business Park in Greenwich, London, making it the largest letting inside the M25 for two years.
2025 represented a year where market sentiment started to swing towards the tenant compared to previous years of a landlord-led market. However, whilst sentiment suggests one thing, the reality of the market differed when considering occupier take-up and attitude in 2025. Demand has diversified, occupier commitment where possible for a build-to-suit (BTS) has increased, and where possible, cash-rich occupiers now seek to take charge of their own destiny in what remains an uncertain funding market.
The year saw the UK face tariffs, budgets, geopolitical uncertainty but also a resurgence from the Far East both in occupational demand and investment, which has arguably left US-led occupiers (Amazon aside) trailing.
Take-up totalled 33.4 million sq ft, an increase of 14% from 2024 and the best since 2022. Also, the year was underpinned by the implementation of several large-scale, long-term strategic commitments in the grocery sector. The deals to Tesco at London Gateway (880,000 sq ft) and M&S DIRFT (1.3 million sq ft) were a clear indication of occupiers committing to bespoke BTS developments, which included huge levels of automation. In what is deemed an uncertain time for occupiers in the employing, growing and retaining labour, these are clear signs of future commitments that, upon practical completion, they anticipate having a competitive advantage over their competitors. These acquisitions reflected a bigger share in the BTS category, at 10 million sq ft, which is a marked improvement from 2024. This is also reflective of the continued ‘stay vs go’ analysis with occupiers seeking fit-for-purpose, future-proofed developments that can attract and retain top-level employees whilst meeting customer demands.
The BTS market is and will remain challenging in the current funding cycle, with bespoke units on long leases not deemed institutional; therefore, rents remain above market levels, but in return, occupiers are securing their desired space to implement such fitout requirements.
We arguably did not feel the full impact of Trump’s tariffs, with the 90-day reset coming in September 2025. This was overshadowed by a very late UK Budget, giving logistics occupiers more headwinds to consider. From Trump’s initial actions, this gave occupiers, particularly Far East-based occupiers, the opportunity to invest in the UK. This was demonstrated by JD.com acquiring c.500,000 sq ft in Milton Keynes in May and a further 900,000 sq ft in Desford in December 2025.
We have noted further demand from the defence sector throughout 2025 and expect this to grow into 2026. Whilst demand for this sector is growing, we do not necessarily envisage this to be committed to the heart of the golden triangle per se, but more linked to existing MOD bases, given supply chain requirements versus speed of delivery. Developers are recognising this increased diversification of demand, and it is encouraging to see speculative construction standing at 6.1 million sq ft at the turn of the year; however, attention should also be placed on ports, particularly those with freeport benefits, which could see a cluster of defence-related take-up, subject to speculative development.
Alongside Chinese e-commerce and the supermarket sector taking a strong percentage of take-up, the third-party logistics (3PL) sector remained the highest take-up by sector at 10.4 million sq ft or 31%. These deals were backed mainly by Amazon-led contracts in Avonmouth (880,000 sq ft), Sittingbourne (440,000 sq ft) and Sherburn (550,000 sq ft). With Amazon outsourcing its distribution in these locations but not stopping its own development programme, 2026 could be the year that Amazon restarts its growth targets across the UK, now that its first-generation developments could arguably be deemed coming to the end of their economic life.
2026 will see further opportunities and new challenges for the logistics sector. From an occupier's viewpoint, the proposed ban on upward-only rent reviews will leave occupiers and landlords with contrasting opinions. If passed, we expect occupiers to have to consider shorter lease terms, which, in turn, could affect their own investment in automation and high levels of fitout. As a result, we may see occupiers seeking to buy and invest in their own facilities where cash availability allows. This, in turn, will address the funding / BTS challenge the market is facing and could lead to more JV structures created between funders and occupiers.
As above, we expect further attention will be placed on freeports where benefits such as SDLT, rates and NI savings will be felt more acutely following the upcoming rates revaluation — occupiers may be required to rethink their strategies to optimise these initiatives but also still meet customer demand.
With a strong pipeline of diverse occupier requirements in the market and a vacancy rate below 8% — a slight fall from 2024 — the occupier outlook is positive, but as ever, caveated with external pressures as they will continue to navigate these in order to service customer demands across the UK.