Why the UK logistics sector should step into 2025 with renewed optimism
2024 has certainly tested the resilience of the industrial and logistics sector, especially after the remarkable highs of recent years
This year, the occupier market has been quieter than usual, particularly when it comes to large pre-let deals. Companies are taking their time, hesitant to commit to new spaces as economic and political uncertainties remain. On the investment front, we’ve seen a similarly subdued environment albeit with some positive signs of pricing stability shown towards the end of the year. Whilst we’ve completed a number of disposals and some selective acquisitions ourselves, many investors are choosing to wait for clearer economic signs before making big moves.
It might sound a bit bleak as we approach the festive season, but there seems to be better news on the horizon. Over the last quarter, we’ve seen a clear rise in occupier interest and a shift in sentiment among our customers. Many are rethinking their workspace needs, prompted by changes in supply chains and operational costs. If this interest turns into action, we’re likely to see a boost in occupancy, which would positively impact vacancy rates.
A key driver in today’s decision-making is the ‘flight to quality’. Customers are demanding the very best -whether it’s location, technology, operations or sustainability. This trend, which has long shaped the office and retail sectors, is now firmly rooted in industrial and logistics too. Our commitment to developing and refurbishing state-of-the-art industrial spaces has positioned us well to meet this demand, and these top-tier units are leasing quickly.
As we head into 2025, I feel cautiously optimistic about the investment market. Liquidity is returning, and there’s growing interest in high-quality assets in strong locations. Investors are now more selective, mirroring the discerning approach we’re seeing from occupiers.
The core fundamentals driving our sector – urbanisation, data and digitalisation, supply chain optimisation and sustainability – remain strong, despite the macroeconomic headwinds of 2024. One of our industry’s biggest strengths is the diversity of the occupier base. The workspaces we provide support businesses across the economy, from food processing and R&D to data centres, creative studios, and manufacturing.
Looking ahead, two sectors stand out to me for growth in 2025: data centres, which are crucial for the UK economy and daily life, and aviation. At Heathrow Airport all of our assets are fully let – that’s more than 1.2m sq ft of space in total. Furthermore, we’ve been working with our customers across our airport portfolio to reduce void to meet their requirements and we’ve also just secured one of our largest leases at Gatwick. Together, these evidence high demand for cargo space off the back off a resurgent air freight sector in addition to the return of high passenger volumes post pandemic.
Our active development pipeline, which is largely pre-let, will be a key driver of rent roll growth in 2025. We also see significant potential within our existing portfolio, with over £130 million in reversion opportunities.
We’re excited to continue developing our £1 billion land portfolio in the UK, which will deliver around 1.2 million square metres of new space, which is a mix of logistics, light industrial and data centres. The market remains supply-constrained, especially in places like London, where there’s demand for modern, sustainable facilities, and as such some great opportunities to strive for.
Beyond steel frames and cladding, market intelligence and data analytics are the future and we’re investing in building our capability in this area. By combining our ‘on the ground’ market experience with data-driven insights, we’re sharpening our understanding of market dynamics and strengthening our decision-making processes.
In conclusion, while 2024 brought its challenges, we’re stepping into the new year with a renewed sense of optimism and a clear vision for the opportunities ahead. Together with the UK Government’s fresh approach to planning, focus on Industrial Strategy and an aspiration to remove the barriers to access the energy grid, I believe our industry is well-positioned to navigate the challenges and seize the opportunities that 2025 will bring.