Introduction

The last two years have seen a market correction as both leasing and investment volumes trended back towards pre-pandemic levels. However, as 2025 draws to a close, it is pleasing to report that both leasing take-up and investment volumes are set for their best year in the last three.

Globally, the picture remains broadly the same as in the UK, as the sector continues to show resilience, with activity levels in Q3 rebounding on a sequential basis after a challenging second quarter, following the spike in uncertainty that followed the ‘Liberation Day’ tariff announcements. Macroeconomic risks have eased somewhat, supported by greater stability in trade policy, which has allowed some postponed deals to complete in the third quarter. More widely, the sector remains aligned with a narrative of ‘normalisation’. In occupational markets, rental growth continues to return to pre-pandemic levels, in line with a more balanced outlook for supply and demand.

In this, the third edition of our flagship annual report, Big Shed Prospects, we aim to examine market issues in an innovative and engaging style. We initially present the bull’s view of the market and examine the factors driving it forward. We then adopt a more bearish stance and examine the issues that could cause the market problems in 2026 and beyond. These sections are divided into three: the first covering economic data, the second examining market data, and the third looking at tangential issues that will have an impact on the market.

Our occupier services and investment team then provide their view on the market trajectory for 2026. Finally, we provide our rental growth and vacancy projections from our in-house models before providing our key themes and take-aways for the year ahead.

Our 2025 Score Card

Last year, we set out two contrasting scenarios for the UK logistics market in 2025. Our bull case anticipated falling interest rates, infrastructure-led growth, and a resurgence of structural demand drivers such as e-commerce, data centres, and nearshoring. Conversely, our bear case warned of persistent inflation, geopolitical shocks, rising vacancies, and mounting cost pressures.

As expected, reality delivered a mixed picture. On the optimistic side, interest rates fell as forecast, and structural trends — particularly data centre expansion and nearshoring — proved powerful demand drivers for logistics land and power-rich sites. However, GDP growth and consumer spending underperformed, and rising e-commerce penetration was more muted than predicted. Infrastructure investment materialised, but at a slower pace than envisaged.

Meanwhile, inflation eased but remained above target, and geopolitical volatility continued to shape supply chains. Vacancy rates rose, though not to the extremes feared, with secondary stock under the greatest pressure. Business rates hikes were confirmed for 2026, cementing cost escalation as a key concern for occupiers.

On balance, our bear case was more accurate for the economy: while we correctly anticipated rate cuts, we overestimated the potential for a demand-led recovery. For the logistics market, the bear case also edged ahead, with weaker short-term demand and rising vacancy dominating sentiment. That said, our bullish call on long-run structural drivers was validated — data centres and nearshoring are now central to market dynamics and will continue to shape development strategies into 2026.

All of this is to say that when we sat down in 2024 to decide on our themes, we struggled internally to build a bull case, while the bear case was much clearer to us. As such, while market sentiment remains weak, we’d argue that it is overly gloomy. Indeed, in the 2026 Big Shed Prospects report, we set out our new bull and bear cases, with the task of writing the bull case being substantially less daunting than it was twelve months ago.

Read each section of the report below.