With market data painting a variable and volatile picture, Michael Alderton from our Occupier advisory team and Charlie Foster from our investment team examine the prospects for the market in 2026
Occupier advisory
As the dust settles on a tumultuous year for occupier decision-making, it feels remarkable that 2025 is set to be the strongest year for take-up in three years. The 2025 data from the Savills occupier requirements index has been volatile, ebbing and flowing, given the geopolitical environment. Indeed, this year alone, occupiers have had to contend with the rise in employment costs from the 2024 Budget, the impact of an upending of trade relations driven by US policy, continued uncertainty regarding the future business rates environment, and an increasing duty to comply with ESG regulations.
As we head into 2026, the Savills Occupier Advisory team remains exceptionally busy advising corporates across the manufacturing, logistics, retail and defence sectors on projects requiring many different types of warehouse real estate. In line with recent years, the majority of these projects fall into supply chain reorganisation, restructuring, consolidation and efficiencies rather than solely business expansion and growth. This is supported by data from the recent Savills European Logistics Census which shows that cost pressures remain occupiers' number one concern and that the primary reason for taking new space is for business growth. It continues to remain the case that decision-making processes are taking longer, as referenced by a recent internal Savills survey, where the number one response to the question ‘How has occupier behaviour changed over the last 12 months?’ was that deals are taking longer. Other issues flagged by this survey include occupiers delaying major capex decisions, seeking more flexible lease terms, and, in some cases, consolidating their networks.
It would be fair to say that, as we head into 2026, the market is tilting towards the most ‘occupier friendly’ it has been since the aftermath of the global financial crisis, as, in very simple terms, occupiers have the most choice they have had when seeking new facilities for over 15 years, but this is very location and size dependent. However, that masks many market realities that can still conspire to mean navigating the next few years won’t be plain sailing.
All of this suggests that 2026 will play out in a similar fashion to 2025
Michael Alderton, Director, South East Industrial
Indeed, given the aforementioned strategic nature of many larger requirements, we continue to see that the availability of units that match a checklist of deliverability, location, size, height, yard depth, power availability, and ESG remains low, meaning that occupiers may be forced down a BTS route to satisfy their needs. That comes with its own challenges as BTS remains at its lowest level since 2013, as developers continue to grapple with viability sparked by rising land values, build costs and uncertain capital markets that can quickly make BTS unviable.
However, for occupiers who are a bit more footloose, there are deals to be done. We continue to see growth in headline rents, but incentive packages are increasing and the average lease length is getting shorter. With voids on vacant buildings continuing to increase, we expect that more landlords will take a proactive approach to incentives to get deals over the line.
As we anticipated in 2024, there may never be a better time to consider owner occupation, as many developers consider selling sites to fund future development or land sales not attracting the competition from developers seen in previous years. This has the added benefit of also removing any uncertainly regarding any potential future ban on upward-only rent reviews.
In the same article last year, we also called 2025 the year of the Freeport, and whilst we have certainly seen some deals in Freeport zones — such as Tesco at London Gateway — it has been more of a trickle than a deluge. Whilst the savings on offer — such as covering stamp duty, national insurance and business rates — are considerable, the administrative burden associated with capturing the benefits suggests that the deal flow is constrained. This, however, could well change as the rates revaluation really does now bite on properties in excess of £500,000 RV — this will give occupiers more challenges and considerations for the occupier market and demand pool.
All of this suggests that 2026 will play out in a similar fashion to 2025, but with the Savills research team forecasting meaningful supply drops into 2026 and beyond, the market will likely tip back to landlord-favourable as the second half of the decade plays out.
Capital markets
As we approach the end of 2025, it is interesting to note that total investment volumes are set to reach their highest level for three years, exceeding the 2024 figure of £10.8 billion, and yet the statistic won't align with year-end sentiment for many. Dusting off our commentary from last year, which highlighted concerns around the cost of debt, what Trump may implement in relation to trade and continued conflict in the Middle East and Ukraine, shows that sometimes the more things change, the more they stay the same.
Whilst total investment volumes for 2025 are set to exceed those of 2024, the figure has been skewed by corporate acquisitions. However, looking at the global data, several underlying trends are indicative of a recovery that can be sustained. One of the most telling is the rise in average deal size, which reflects improving liquidity in larger lot sizes. Indeed, the number of individual properties transacting for US$100 million or more has risen by 14% on the year. Moreover, many deals are attracting multiple competitive bids. This would suggest that buyers and sellers are increasingly aligned on pricing, consistent with a growing body of evidence in support of the conclusion that we are now well past the trough in values.
As we head into 2026, many of the key themes from last year remain in place. Nevertheless, the global economy continues to demonstrate remarkable resilience. This has been a consistent theme in recent years — from the outbreak of war in Ukraine and the inflationary surge that followed, to a generational spike in interest rates and a US president who continues to upend the traditional norms. Despite these challenges, markets are becoming more liquid, and investors are finding a way to transact, and absent external shocks, momentum should continue to build across the world. One external shock on investors' minds will be the growing speculation around a potential AI-driven bubble in equity markets, which has replaced tariffs as a top concern for investors. However, all things being equal, we expect momentum to continue building and 2026 to be incrementally better once again.
We are already seeing evidence of increased core investor activity in late-year marketing processes, and we further expect their return to act as a catalyst to bring more sales to the market
Charlie Foster, Director, Business Space Investment
What stands out for the market in 2025 has been the shift in investor sentiment away from single let units towards the multi-let market. Indeed, based on data to the end of November, we can see how just 17% of investment volumes have been for single let units, down from a five-year average of 27% of the market. As Gilt rates have remained stubbornly high (relatively) over the year, the demand for multi-lets hasn’t wavered as investors sought to capture the investment performance required to satisfy their typically value-add target returns in the shorter time periods than single lets allow.
Moving into 2026, that could change; however, as core buyers return to the market, driven by the consolidation within the Local Government Pension Schemes (LGPS) into super pools. Additionally, the denominator effect should provide further momentum in the new year, as major institutional investors look to rebalance their portfolios towards real estate, given the significant outperformance of global equities in recent years. We are already seeing evidence of increased core investor activity in late-year marketing processes, and we further expect their return to act as a catalyst to bring more sales to the market.
With an expected increase in active core / core+ purchasers and assuming Gilt rates trend downwards, it is likely that yields could follow as the year progresses. And finally, investors always follow the occupiers as sentiment shifts, so it’s encouraging to see the occupier market continue to perform well; meaningful drops in supply are expected, which, in turn, could stimulate above-trend rental growth as the second half of the decade unfolds.