Commercial Quarterly Examiner – industrial market update Q1 2026

There is little new pressure on logistics and industrial take-up from online retail.

Internet sales penetration of the UK retail market peaked, at 37.2% of all retailing excluding fuel or 45.6% of non food sales, in February 2021 during the third lockdown. At the end of Q1 internet sales as a proportion of all retailing increased to 28.7% from 28.4% at the end of Q4 2025. Internet non-food sales decreased by 20 bps to 25.2% in Q1.

Output for the Transport and Storage industry rose in the three months to the end of December 2025 by 1.3% and grew by 5.7% y-on-y. Twelve months earlier in December 2024 the y-on-y rate of growth was 2.7%.

The industrial market is segmented between Logistics being 50,000+ sf of warehouse space; smaller Light Industrial units for local distribution, and smaller scale manufacturing and repair workshops; and Specialised space for large scale manufacturing, R&D, Cold Storage and data centres. Most of the UK’s stock of industrial space belongs to the logistics segment (66%) whilst 27% is Specialised and less than 10% Light Industrial.

Occupational view

• At the national level the occupational market continues to soften as availability increases, take-up decreases and MRV growth slows.
• The development pipeline continues to shrink.

Availability of logistics space to let increased across London, the South East and the Rest of the UK. In Q1 availability increased by 2.8% in London by 2.7% in the South East and 2.3% in the Rest of the UK. In the key Logistics Triangle, availability increased by 4.9%.

Across the UK the take-up of all industrial space declined by -7.8% in Q4 2025, whilst the demand for logistics space grew by 7.7% to 16.1 million sf from 15.0 million sf a quarter earlier. Preliminary figures for Q1 2026 suggest that all industrial take-up has fallen by a further -11.5% to 16.7 million sf. Logistics take-up decreased by -11.7% to 14.2 million sf.

In the largest industrial and logistic letting in Q1 2025 Logicor Europe leased all three speculatively built units at Logicor Park, Daventry to supermarket chain, Farmfoods, who will now be able to expand their footprint across the UK from this distribution hub. The park is situated in the heart of the logistics “Golden Triangle,” with access to over 51 million consumers in under three hours, and London in less than two hours via the M1, M40 and M45 motorways. Logicor own, manage and develop logistics real estate in key transportation hubs close to major population centres across Europe.

The UK industrial market rental value (MRV) growth is trending downwards. In Q1 it decreased to 0.9% from 1.2% in Q4 2025. MRV growth y-on-y dropped to 4.1% in March from 4.5% in December.

London MRV growth decreased by 40 bps to 4.4% y-on-y in March from 4.8% in December, 12 months earlier in March 2024 y-on-y growth was 5.6%. South East MRV growth decreased to 3.9% y-on-y in March from 4.0% in December and MRV growth across the Big 6 regional centres fell to 4.7% y-on-y in March from 5.2% in December. In Leeds 12m MRV growth fell 116 bps to 3.9% between Q4 2025 and Q1 2026 but in Glasgow y-on-y MRV was up 84 bps from Q4 to 10.1%.

The amount of logistics space under construction has been declining since 2022 and decreased nationally by a further -1.1% in Q1 to 34.3 million sf from 34.7 million sf in Q4. In Q1 construction starts across the UK fell -25.7% to 2.48 million sf in Q1 from 3.33 million sf in Q4 2025. In London the development pipeline decreased by 131,000 sf in Q1 to 1.6 million sf. But across the eight largest regional logistics centres the development pipeline increased by 2.5% to 13.95 million sf. M1 XL, the largest speculative scheme in the Logistics Triangle near the East Midlands Airport providing 645,000 sf is due to complete at the end of the year and remains available to let.

London’s largest speculative distribution scheme is MLM Park Crayford, a multi-unit urban logistics and industrial development on a c.12.2-acre site in Crayford, close to Junction 1a of the M25 / Dartford Crossing targeting London and South East “lastmile” distribution occupiers. The scheme will provide 304,000 sf across three warehouse buildings. Construction will be completed later this year and all three buildings remain available to let. Across the capital, ten data centres are also under construction providing 3.85 million sf. All are fully let / occupied.

Investment view

• UK regions outside London and the South-East outperform due to higher income returns and stronger rental growth.
• Industrial investment transactions experienced a significant rebound in the fourth quarter; however, preliminary estimates suggest that investment volumes declined in the first quarter.

Year-on-year London industrial total returns decreased to 6.1% from 7.0% in Q4 and 8.4% in Q1 2025. Across the Big 6 regional cities, y-o-y total returns decreased to 8.2% in March from 9.4% in December and 11.8% a year earlier. In the South East y-o-y returns decreased to 4.8% in Q1 from 5.6 % a quarter earlier and 9.5% in Q1 2025. London, South East and Big 6 industrial yields have all de-rated / softened in Q1 and over the last 12 months. Industrial investment transaction enjoyed a strong bounce in Q4. All industrial Investment volumes1 increased in Q4 2025 by 43.3% to £1.444 billion in 1,316 transactions or, £2.958 billion in current value terms, from £1.007 billion (£2.054 billion) in 920 transactions in Q3. Preliminary estimates indicate that investment volumes decreased Year-on-year London industrial total returns decreased to 6.1% from 7.0% in Q4 and 8.4% in Q1 2025. Across the Big 6 regional cities, y-o-y total returns decreased to 8.2% in March from 9.4% in December and 11.8% a year earlier. In the South East y-o-y returns decreased to 4.8% in Q1 from 5.6 % a quarter earlier and 9.5% in Q1 2025. London, South East and Big 6 industrial yields have all de-rated / softened in Q1 and over the last 12 months.

Industrial investment transaction enjoyed a strong bounce in Q4. All industrial Investment volumes¹ increased in Q4 2025 by 43.3% to £1.444 billion in 1,316 transactions or, £2.958 billion in current value terms, from £1.007 billion (£2.054 billion) in 920 transactions in Q3. Preliminary estimates indicate that investment volumes decreased to £688 million (£1.419 billion) in 654 transactions in Q1 2026 compared to the ten-year quarterly average of £1.451 billion (£2.657 billion) and 1,075 transactions.

Despite the growing strength of performance from Rest of UK industrials, London attracted the largest slice of inward investment in Q4 2025 amounting to £385.4 million in value terms, representing a 61% increase from £239.1 million invested in Q3. A further £1.085 billion was targeted across the Rest of the UK including Manchester, Coventry and Bristol.

London’s continuing attraction for investors was demonstrated by DWS Group’s purchase of Sainsbury’s Charlton Distribution Centre in SE7 from Santander for £123.2 million. The 338,000 sf warehouse in Charlton Riverside adjoining the South Circular Road and Blackwall Tunnel. It was developed in 2012 and contains chilled, frozen and ambient logistics areas and serves an estimated 200 Sainsbury’s stores across the South East. DWS Group is one of Europe’s largest asset managers. It was originally Deutsche Bank’s asset management arm before being floated separately in 2018, although Deutsche Bank still retains a majority shareholding.

In the Midlands, Prologis UK completed the sale of a 909,000 sf, three-asset logistics portfolio to EQT Real Estate, for £130.25 million (5.65% NIY). The portfolio included two units at Rugby Central Park and a unit at Nuneaton’s Bermuda Park. This sale highlights continued high demand for well located logistics assets in the Midlands. The assets are fully let to Continental Tyres, Unipart, and Haier (Hoover owner) and others. EQT Real Estate, headquartered in Stockholm, manage approximately 270 billion euros in assets focused on the logistics and living sectors. In April this year capital raising for its European Logistics Value Fund V closed with commitments for 3.1 billion euros making it the largest ever pan-European, sector-specific real estate fund raising.

^{1 Investment volumes are the quarterly value of investment transactions adjusted for capital growth over the analysis period and provide a measure of transaction activity that is not obscured by changes in value.}