Industrial Investment Mellows

The first quarter of 2025 saw industrial investment reach £1.4bn, a 34% decrease on the same period last year. Investors are still seeking value in multi-let industrial estates where there are more short-term rental growth opportunities. Big-box investment has been relatively muted, but there are several large single-let opportunities currently being brought to the market, which could bolster Q2 investment volume figures. 

New Market Entrants

The quarter also saw some new market entrants, including Singaporean REIT Mapletree who made significant purchases such as Verda Park, Wallingford, a deal brokered by BNP Paribas Real Estate. Despite this influx of Asian investor interest, the wider trend of foreign investment remains firmly with US-based capital which represented 34% of all UK industrial investment in the 12 month period to the end of Q1 2025. 

The industrial sector is seeing large companies such as Blackstone and LondonMetric looking to benefit from portfolio diversification through M&A deals. Blackstone are in advanced discussions to purchase Warehouse REIT, meanwhile LondonMetric have looked to buy Urban Logistics REIT. These deals would provide the acquiring companies with a more varied tenant base as well as greater regional spread in asset location.

Global Volatility Favours UK?

Flat prime yields, a steady recovery in capital value growth, and stable income return could give industrial investors cause to see the UK as a relative safe-haven in a wider, more tumultuous market. We would anticipate some mild downward pressure on industrial yields towards the end of the year as forecasted further rate cuts from the Bank of England lowering borrowing costs and boost investor confidence.

Quarterly Take-up Improves

Demand for units over 100,000 sq ft reached 6.3m sq ft in the first quarter of 2025, an increase on the previous quarterly performance. However this was c.29% below the 10-year Q1 average (2015-2024). The uptick keeps industrial and logistics quarterly demand relatively consistent in the post-pandemic years, with a stable and diverse occupier base, driven by the logistics sector and the regional disposition towards the Midlands.

Future Big-box Demand

The sector has benefitted from Food & Beverage occupiers in recent years, providing counter-cyclical demand in challenging economic periods. The industrial sector can also look to the Defence sector which has been boosted by the Spring Statement. In it, plans were announced to increase the UK’s spending by the end of 2027 and again in the next parliament. This provides some comfort for the industrial sector as tariffs from the US Administration could cause some UK occupiers to bide their time before increasing their industrial footprint.

Limited Grade A Space

Around 59.6m sq ft of industrial space is currently available for occupation, however almost every region is made up predominantly of second-hand supply. The development pipeline is expected to deliver 11.1m sq ft by the end of 2025, enough to sustain less than two quarters of demand at Q1 2025 levels. 

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