Following several years of rapid change, the UK industrial and logistics sector appears to be entering 2026 with an air of stability. Demand has returned to pre-covid levels and remains relatively healthy but leasing take-up increasingly depends on how well standing assets match the needs of occupier’s requirements.
Location, building quality and ease of operation are once again central to performance, and assumptions that once applied across the market now need to be treated with greater care. The question for 2026 is where that performance will be found and which types of assets are best placed to benefit.
Overall demand remains robust, but it appears that the detail matters more than the headline numbers. Large-scale logistics units remain central to national distribution, but many occupiers are now prioritising operational efficiency over further network expansion. Portfolio consolidation is becoming more common, with older buildings being replaced by fewer, better-quality facilities. This may reduce total take-up in square foot terms, but it strengthens demand for modern space that works harder for occupiers.
Urban and last-mile logistics remains popular, driven by established e-commerce patterns, high consumer expectations and the need to be close to labour. By 2026, these assets are widely regarded as essential to day-to-day operations by third-party logistics firms, online retailers, manufacturers and many other users, and we therefore expect demand to remain strong. Well-located sites with good access and practical layouts continue to attract strong interest, while less efficient locations are finding it harder to compete – despite offering a rental discount and/or leasehold flexibility.
Manufacturing demand is increasing, driven by a mix of broad-based reshoring and targeted sector growth. Companies are bringing production back to the UK to mitigate global political and economic risks, diversify supply chains and improve resilience through nearshoring and greater inventory security. At the same time, newer businesses in higher-value sectors are scaling rapidly and require bespoke, high-specification facilities. As a result, demand is strongest for modern units offering sufficient power capacity, clear height and operational flexibility and has seen a resurgence in owner occupiers self-funding their own design and builds where an ‘off the shelf’ option is not available.
Rental growth in 2026 is likely to be uneven. Prime assets in strong locations continue to benefit from limited supply and rising build costs, supporting further upward pressure on rents. In contrast, older or less well-specified buildings face a tougher environment, where rental growth often depends on investment in improvements rather than market movement alone.
Occupiers are paying closer attention to total running costs, not just headline rent. Energy use, maintenance, staffing and environmental performance all play a part in decision making. Buildings that help reduce these costs can justify higher rents, while those that do not are becoming less attractive, even if initial rents appear competitive.
Investor interest in the sector remains strong, but it is more selective than in previous years. There is a clear preference for assets that offer reliable income and long-term relevance, particularly those that are difficult for occupiers to replace. Opportunities to improve or reposition buildings still attract interest, but investors are increasingly cautious and focused on what can realistically be delivered.
Development remains limited by land availability, power supply, planning constraints and funding costs. While this continues to support existing assets in the short term, it also highlights the importance of delivering the right type of space. Schemes that offer strong sustainability and environmental credentials as well as higher power capacity are better placed to attract occupiers, particularly as speculative development remains limited.
The outlook for 2026 remains broadly positive, but risks remain. A weaker economic backdrop could reduce space requirements, and wider geopolitical uncertainty continues to influence supply chains and costs. There is also the risk that some locations fail to benefit from longer-term trends if infrastructure or labour constraints persist. That said, 2026 could also mark a period of broader investor appetite for big box logistics, as the sector offers the ability to deploy large amounts of capital efficiently, providing income security and the potential to capture significant rental growth.
Looking ahead, the strongest opportunities are likely to sit in markets where demand is structural rather than cyclical.
Urban industrial locations with established planning environments, dependable infrastructure and supportive demographic trends continue to stand out. London industrial remains a clear example, with ongoing demand pressure driven by population growth, last-mile requirements and a chronic lack of deliverable land, supporting both rents and long-term relevance. Similar dynamics can be found in select regional urban centres where infrastructure investment and demographic change are reinforcing occupier demand.
Alongside this, there are emerging signs of a resurgence in larger-scale requirements, particularly across the Midlands, driven by occupiers seeking stronger national connectivity and the need to upgrade and consolidate national distribution centres (NDCs). In many respects, the market is returning to its roots, albeit at a significantly larger scale. In these locations, well-located, functional assets are not only easier to let, but harder to replace, making them best placed to perform as the sector moves into its next phase.
Partner - Industrial & Logistics Analytics
Partner - Capital Markets - Industrial & Logistics
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