Supply

Available supply amounts to 11 million sq ft across 49 separate units, representing a 30% decrease over the past 12 months and a vacancy rate of 7.51%, which has fallen by 337 basis points. With such a contraction, the region’s supply has 1.24 years' worth of stock remaining relative to historic demand and is expected to decrease further as we are tracking 1.3 million sq ft of existing units under offer across the region. The years’ worth of stock has declined consecutively since Q3 2025, when it stood at 1.57 years.

A common trend across the market is an increase in second-hand supply, driven by lower-quality Grade B and Grade C units. As the chart shows, the East Midlands has also been affected. When analysing regional stock, 58% consists of Grade A units, including 21% new speculative units and 37% second-hand Grade A units. The remaining supply includes 36% second-hand Grade B units and 6% low-quality Grade C spaces. However, as the chart illustrates, the rising proportion of lower-quality stock in recent years has significantly contributed to increasing vacancy rates; these units are often considered obsolete or below modern occupier standards.

Alongside an increase in second-hand supply, we have also observed a growing demand for XL-Grade A boxes. However, across the East Midlands, there is a significant shortage, especially in certain size categories. As of the end of June, only four units of existing stock were available, with just one being Grade A (MPC2). The overall breakdown clearly highlights a gap between lower- and higher-quality options. There are 30 units in the 100,000–200,000 sq ft range, eight in the 200,000–300,000 sq ft range, seven in the 300,000–400,000 sq ft range, one in the 400,000–500,000 sq ft range, and only three over 500,000 sq ft. Ultimately, the supply situation results in a mismatch between the locations where occupiers want to be and the preferred sizes and quality standards that are actually available.

Take-up

Across the East Midlands, H1 2026 take-up reaches 5.8 million sq ft across 23 units, a figure 137% higher than the same period last year and 141% higher than the pre-Covid average (2015–2019). This is remarkable given the wider economic headwinds in the UK over the past 12 months, which have posed challenges for some occupiers and delayed decision-making, but it also further consolidates the East Midlands’ dominance, as it accounts for 38% of the UK’s year-to-date activity in 2026. Such dominance reflects a less land-constrained market, with its geographical and motorway network advantages and access to logistics corridors, such as the M1, positioning it uniquely and attractively to major distribution centre operators.

When analysing the type of space let, there is a clear preference for best-in-class assets, as the sector continues to see a flight to quality. In H1 2026, 50% of space let was newly built speculative development, 18% was Grade A built-to-suit (BTS) development, and 4% was let before PC, totalling a Grade A stock share of 73%, signalling that there still remains a strong preference for buildings with better ESG credentials. The remaining space transacted was second-hand (27%). This clearly evidences a flight to prime.

Furthermore, despite the challenging development market, we have seen over 1.06 million sq ft of BTS activity, accounting for 18% of the region’s take-up. This is a positive sign, indicating that occupiers' long-term commitment to the region remains strong. We are also aware of additional BTS deals in progress, which are expected to emerge later this year. This ongoing commitment to BTS activity also emphasises the limited availability of existing Grade A units, and many occupiers, if possible, are seeking bespoke options to meet their specific needs.

When analysing deals by size band, 13 deals were within the 100,000–200,000 sq ft range, four in the 200,000–300,000 sq ft range, two in the 300,000–400,000 sq ft range, one in the 400,000–500,000 sq ft range, and three in the over 500,000 sq ft range. Occupier activity continues to be led by third-party logistics (3PL) providers, which account for the largest share of space and 60% of total activity. This is a significant share, driven by the fact that all deals in the XL space have involved 3PL providers. Second to 3PLs are grocery retailers, who account for 14%, mainly due to further activity by M&S.

Development pipeline

The East Midlands’ development pipeline has clearly responded to market supply constraints, increasing by 108% compared to year-end 2025 to 2.7 million sq ft of space under active construction. Although the speculative development and funding market remains challenging, developers in the East Midlands continue to invest, with new space under construction rising by 835%. This demonstrates a sustained commitment to meeting occupier demand, which remains strong across the region. Additionally, with a shortage of new Grade A stock emerging in certain size bands and locations, the market seems increasingly vulnerable to a future supply crunch, creating opportunities for well-positioned developments.

So far in 2026, only 230,000 sq ft of speculative development has been completed, meaning the remaining 9% of the 2.7 million sq ft is scheduled for H2 2026, with 91% due in 2027 or later. Ultimately, this leaves current requirements with limited options and explains why we remain confident in the region’s rental fundamentals. Our model forecasts a 2.1% annual increase through to 2029 in the baseline scenario, rising to 2.7% in our optimistic outlook.

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