From tariffs to tenants, property partner, Richard Holmes covers the forces shaping UK industrial property in 2025 in a recent article.
- Davitt Jones Bould
- Jul 20
- 6 min read
July 2025
By Richard Holmes, a Partner at Davitt Jones Bould.
The industrial and warehousing sector has been one of the most resilient in UK commercial real estate in recent years thanks to a number of things including trends in supply chains and consumer shopping preferences. Even factoring a degree of general uncertainty in the financial markets due to Donald Trump’s announcements regarding tariffs on overseas goods, there is still a desire to acquire the right industrial and warehousing stock if the price is correct and the right sort of tenants are in occupation.
That said there are some challenges from an occupier point of view and I have witnessed a couple of deals, acting for the seller/landlord where the tenant/buyer has not gone ahead as a proportion of their business came from the USA and they did not want to commit to taking the space. On the other hand, one of my other logistics/distribution clients are busier than usual because of freight being diverted to Europe, rather than being sent to America because of the tariff issue.
And although UK interest rates have fallen in the last year which should usually help improve confidence in the market, businesses are still finding trading challenging because of the increasing cost of materials and the fact that supply of certain goods can sometimes be slower. Broadly speaking though, the industrial and warehousing sector is continuing to be stable when contemplating current and future investments though there are some variations in terms of the size of units that are appealing more to potential tenants.
Research from CBRE supports this upward trajectory. According to its UK Logistics Market Summary for Q1 2025, UK logistics take up totalled 5 million sq. ft, up 20% compared with the figures for Q1 2024.
Cushman & Wakefield Industrial Marketbeat Report for Q1 2025, meanwhile, shows rents experienced modest growth with a 3.7% year-on-year increase. It showed the ‘big box’ market of large distribution warehouses led the growth in occupational demand with strong activity from third party logistics providers (which complete tasks like warehousing, inventory management, order processing, and shipping on behalf of another business) accounting for over 2 million sq. ft of logistics and industrial space.
At DJB, we act on behalf of both landlords and tenants and have seen a particular demand for industrial spaces within the 3,000 to 10,000 square feet range, with a consistent appetite both to buy and lease these smaller units. Demand is coming from a diverse range of tenants, from small distribution companies and local businesses to larger logistics firms looking for last-mile delivery spaces.
Lease lengths are reflective of an overall move to shorter terms throughout the real estate world. Nowadays, you’ll typically see shorter leases, often containing break provisions, as industrial tenants want increasing flexibility. Deals can be structured in a way to work for both landlords and tenants with the correct advice. For example, I have worked on a few deals recently where landlords have granted a relatively short term lease of between one and three years to a tenant, with an option to buy included in the lease in favour of the tenant, which can be exercised by the tenant during the term. This scenario benefits the landlord as it gets the tenant into occupation and paying rent and for the tenant, it allows them to operate their business and get trading, plus they can then have more time to secure bank funding etc if needed. Funds for their part want to obviously keep their investment on return. Leases tend to be subject to inflationary rent reviews or open market reviews, with demand often outstripping supply around the country from the South East to the North West.
In terms of geographical spread, the robustness of the sector is particularly reflected in well-connected areas near motorway junctions. I work out of our Manchester office and on my commute from Cheshire, I see a lot of evidence of this, just off the motorway network there. As well as the northwest, locations near major airports like Stansted and East Midlands continue to be a popular choice. CBRE’s Q1 report saw the South West post the highest take up for the quarter, while the East Midlands has the highest take up share over the last year. Cushman & Wakefield Industrial Marketbeat Report points to Wales and the West Midlands being the most reliant on US exports, which may have an impact on demand for industrial space in light of the new trade tariffs.
And while the pandemic saw a wholesale shift to online, there appears to have been a partial shift back to physical properties on the high street which is reflected in the warehousing and logistics provision, as retailers seek to ‘nearshore’ their distribution networks.
In common with other parts of the real estate market in the UK, the planning process, as well as increasing construction costs and labour shortages, remains one of the biggest bottlenecks in the industrial and warehousing market. There are scores of brownfield sites ideal for industrial use throughout the country, facing planning delays of months or even years. While demand for new developments is high and there appears to be an appetite from certain funders, getting planning approval has become increasingly difficult. The current government’s Planning and Infrastructure Bill, which has passed through the House of Commons and is currently being scrutinised by the House of Lords may alleviate this situation to some extent.
Of course, the situation regarding planning impacts the supply and demand balance, with the focus on retrofitting older stock, while planning approval for new builds remains in progress. This is coupled with a continued focus on sustainable development. Pension funds and other institutional investors tend to prefer higher EPC ratings on their buildings in order to meet their long-term ESG investment standards and enhance the value of their assets to cater to environmentally conscious tenants.
Occupiers today are increasingly demanding higher standards of sustainable building, driven by corporate social responsibility pledges and the cost savings that energy efficient premises provide. Buildings with EPC ratings of A or B can command the highest rents and, in my experience in working on behalf of both landlords and tenants, industrial and warehousing stock has generally got to have at least a D rating. Any less than that and renting them out becomes much less viable without improvements. Insight from Lambert Smith Hampton backs this up, pointing to demand for ESG compliant space as one of the key factors driving leasing activity and rental growth during 2024.
The emergence of green leases is something I’ve been aware of for the last fifteen years, with specific clauses relating to environmental responsibility, minimising waste and meeting carbon reduction targets. With some leases, each tenant is set up individually and pays their own energy bills and sometimes it is more of a communal set up, particularly with larger buildings.
In a deal I worked on in the last year, for instance, provisions were made for future solar panels installation on warehouse rooftops. Through my role in overseeing the wording of green leases, there needs to be clarity around whether the landlord or the occupier has ownership of and responsibility for repair of these type of sustainable elements. Industrial parks are increasingly designed with a view to incorporating renewable energy solutions. EV infrastructure in particular is one element that I am seeing incorporated within the ecosystem of industrial space and warehousing.
While there is a general move in the built environment towards more sustainable practices ahead of meeting climate change targets such as the 2030 Paris Agreement, there is a feeling of uncertainty among property owners over what the political priorities will be, both on a national level and for major parts of the world in the next five to ten years.
From my position, the UK’s industrial and warehousing sector looks set to maintain its resilience throughout 2025 and beyond. I see a market that is robust yet dynamic, influenced by shifting tenant expectations, regulatory pressures, commitments to net zero targets and of course political policies on trade from the major economies around the world. The underlying fundamentals of high demand, limited supply, and that focus on sustainability—are likely to keep it strong for years to come.
Find out more about Richard here.
Richard Holmes(Partner)
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