The industrial sector is poised for continued growth despite the challenges

The industrial and warehousing sector has remained one of the most resilient parts of the UK commercial real estate market in recent years, buoyed by, among other issues, shifts in supply chains and changing consumer shopping habits.

Despite wider uncertainty in global financial markets, caused by factors such as Donald Trump’s announcements around tariffs on overseas goods, there remains a clear appetite to acquire well-located industrial and warehousing stock, especially where the pricing is right and reliable tenants are in place.

That is not to say the market is without challenges. I have seen a few deals fall through recently where potential occupiers pulled out due to concerns over their exposure to the US market. Trading conditions also remain tough for many businesses, given the rising cost of materials and slower supply of certain goods.

However, at the same time, another logistics client of mine has seen increased activity as freight is being diverted to Europe rather than the US. UK interest rates have also come down over the past year, which would typically boost confidence.

Research from CBRE bears out the industrial and warehousing sector’s overall positive trajectory. Its UK Logistics Market Summary for Q1 2025 shows take-up reached 5m sq ft, up 20% on Q1 2024. Meanwhile, Cushman & Wakefield’s Industrial Marketbeat Report for Q1 2025 recorded a 3.7% year-on-year rental increase.

Some notable trends emerging around the size and type of space that is most in demand include growth by larger distribution warehouses – the so-called ‘big box’ units – plus more than 2m sq ft taken up by third-party logistics providers.

At DJB, where we advise both landlords and tenants, we have seen strong demand for industrial units in the 3,000 sq ft to 10,000 sq ft range. These spaces appeal to a wide range of occupiers, from local businesses and small distributors to larger logistics operators focused on last-mile delivery.

Leases are generally getting shorter, with tenants increasingly requesting flexibility. Break clauses are now standard and many deals are structured to suit both parties. I have recently worked on a number of arrangements where tenants have signed short leases – of between one and three years – with an option to buy during the term.

This setup helps landlords get tenants in and paying rent, while offering tenants time to trade and potentially line up financing if they choose to purchase. Across the country, demand sometimes outpaces supply and leases often include inflation-linked or market rent reviews.

Geographically, the sector is thriving in well-connected areas near key motorways and major airports such as parts of Cheshire and the East Midlands. According to CBRE, the South West recorded the highest take-up in Q1 2025. Wales and the West Midlands, meanwhile, being somewhat more dependent on US exports, could see demand shifts due to aforementioned trade policy changes.

Retail trends include a now partial return to high street retail, prompting retailers to reconfigure their distribution networks and bring them closer to home, impacting warehouse demand.

Planning remains one of the biggest obstacles in the sector, with many ideal brownfield sites delayed by drawn-out approval processes. Despite strong investor interest, new builds are held back by bureaucracy, rising construction costs, and labour shortages. The Planning and Infrastructure Bill, which is now being reviewed in the House of Lords, may help address some of these hurdles.

Investors, especially pension funds, favour buildings with high EPC ratings to meet ESG goals. Tenants, too, are demanding greener, more efficient spaces. In my experience, properties need to have at least a C rating to remain viable. Green leases have grown more common, often outlining environmental responsibilities such as waste minimisation and carbon targets. EV charging infrastructure is also becoming a standard feature in new industrial developments.

With firm demand, constrained supply and a clear focus on sustainability, all the fundamentals to ensure long-term resilience are there. So, despite political uncertainties and global trade issues, I believe the UK’s industrial and warehousing market will continue its strong performance into the second half of the year and beyond.