Industrial market update Q1 2023

The strong performance in this sector over the last few years mean that the upheaval caused by rising interest rates and the September’s mini-budget, which caused a surge in gilt yields, was more pronounced than other sectors.

Yields rose by 100bps in the final three months of the year, and capital values dropped by 20.3% in the same period, even as rents rose by 1.8%.

Even in these more challenging conditions, strong rental growth is still being registered in some key regional markets outside the South East, reflecting the continued occupier demand in this sector – which in turn reflects that the fundamentals of these businesses remain strong. The relatively lower level of rents means that these markets, and others like them, may be more attractive for investors in the coming years, especially when the location is close to consumer demand hubs.

The table below shows the top 5 areas with highest annual rental growth at the end of Q4 2022:

Average of market rent/sfAverage market rent growth, annual
Milton Keynes£10.7216.4%
Liverpool £6.7414.9%
Tees Valley & Durham £6.1113.8%
Source: Cluttons, MSCI

There are signs that demand in logistics has softened somewhat, after a downturn in online sales from the peak at the start of the pandemic. Even so, rents in the final quarter for distribution warehouses still rose by 1%, although yields moved out by 110 bps in the last six months of the year. However, the dip in logistics demand has been offset by a rise in demand from manufacturers keen to expand UK production – the most recent GDP data refers to a large rise in the manufacture of pharmaceuticals towards the end of 2022. Average rents for standard industrial outside London and the South East rose by 2.3% in Q4 2022.

After a very strong start to the year, investment activity slowed in the second half of the year, as the shiver that ran through all property markets in light of high inflation, rising borrowing costs and the mini-budget was particularly felt in the booming industrial sector. However, even with such a pronounced drop in activity in H2, the total levels of investment for the final six months of the year were still in line with longer-term trends, a reflection of the strength of the industrial sector over the last few years.

As we move through this year and into 2024, ESG and business rate rises will be front of mind for occupiers and landlords alike, meaning there will be stiff competition among occupiers for best-in-class property, while occupiers with strong balance sheets will be conscious of their appeal, creating more opportunity for negotiation. As a consequence, rental growth prospects will come under pressure, especially in the South East.

Industrial Q4 2022 unless otherwise statedUKLondon &
South East
Distribution, multi-let estates and specialised industrialCurrent quarter
(last quarter / 5yr ave)
Current quarter
(last quarter / 5yr ave)
Availability rate (%)5.2%
(5.2% / 5.6%)
Vacancy rate %3.4%
(3.5% / 3.2%)
Rental growth (12-month growth rate)8.9%
(8.9% / 6.3%)
9.9 %
(9.5% / 6.6%)
Quarterly take up (sq ft)16.1m sq ft
(16.1 / 24.6m)
3.2m sq ft (3.3m / 5.7m)
Completions (net delivered sq ft)11.2m sqft (13.8m / 11m)1.7m sq ft (1.5m /2.2m)
Total under construction (sq ft)75.0m sq ft
(67.1m / 53m)
15.1m sq ft
(13.3m /9.7m)
Quarterly sales volume £m £1,960m
(£1,891m / £2,833m)
(£985m/ £1,050m)
Average yield4.5%
(3.7% / 4.3%)
(3.3% / 3.9%) *
Prime yield (rack rented) Q1 2023 (Q4 2022)5%- 5.25% (4.75%-5%) Prime regional  4.5%-4.75% (4.25%)
Within M25
Source: Cluttons, CoStar * Yields for industrial in South East

Industrial: Key investment transactions

Property addressTown/City
Building size
(sq ft)
Sale Price (£m)Net Initial YieldBuyer
Chequers LaneDagenhamQ4 2022155,000 sq ft£33.5m4%Boreal IM Ltd & 1
Thorton Rd Industrial EstateCroydonQ4 202284,000 sq ft£19.25m5.29%Mileway
Silver Bullet, Hams HallBirminghamQ4 2022140,000£20m4.50%CBRE Capital Advisors
Source: Cluttons, CoStar

The information provided in this report is the sole property of Cluttons LLP and provides basic information and not legal advice. It must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent of Cluttons LLP. The information contained in this report has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the accuracy of this information. Cluttons LLP does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.


If you do not wish to receive further communications from us, please email [email protected] More details on how to opt out can be seen in our Privacy Policy.

Gráinne Gilmore

Director of research & insights

T +44 (0) 20 7647 7142

If you do not wish to receive further communications from us, please email [email protected] More details on how to opt out can be seen in our Privacy Policy.

Jonathan Rhodes


T +44 (0) 20 7647 7246

If you do not wish to receive further communications from us, please email [email protected] More details on how to opt out can be seen in our Privacy Policy.

Related research


Commercial market update Q1 2023

The bond vs property yield spread ticked up in Q4 but remains nearly the narrowest in a decade.

Retail market update Q1 2023

Retail sales ticked up slightly in January but are still down on a three-monthly basis from the post-pandemic highs in the summer of 2021.

Industrial market update Q1 2023

The strong performance in this sector over the last few years mean that the upheaval caused by rising interest rates and the September’s mini-budget, which caused a surge in gilt yields, was more pronounced than other sectors.

Office market update Q1 2023

UK office vacancy rate rises, but masks a two-tier market.

UK economic outlook Q1 2023

The economic outlook for the UK is challenging this year, but there is growing consensus that the downturn will not be as long as previously expected.

Commercial market update Q3 2022

Bond yields have settled down, but property yields are exposed to some repricing as investors take into account higher borrowing costs.

Industrial market update Q3 2022

Rents and capital values surged this year in response to high levels of demand for occupiers and investors alike.

Office market update Q3 2022

The central theme in this sector is the flight to quality by investors and occupiers alike.

Retail market update Q3 2022

This sector was hit hardest by Covid and the cost-of-living led recession will likely deliver another blow.

Commercial market update Q2 2022

Economy is slowing and, early suggestions that we may avoid recession have been swept aside by the Bank of England following on from their August meeting.

Industrial market update Q1 2022

The rent rise continues: If the classical economists’ definition of inflation being ‘too much money chasing too few goods’ needed a perfect illustration that the industrial sector is it.

Office market update Q1 2022

Historically there has been a very strong link between employment growth and increased demand for office space. The employment market is one part of the economy that is weathering the current storm well.

Retail market update Q1 2022

with so many bad news headlines over the cost-of-living crisis and geopolitical uncertainty, it is no surprise that consumer confidence has faltered and dramatically so.

Commercial market update Q1 2022

The commercial real estate sector has been through an extraordinary year, outperforming other asset classes with total returns of 23.9% over the past 12 months.

Commercial market update Q4 2021

It has been a long pandemic, and Omicron provided a sharp reminder that it might not be over quite yet. Despite this, there are signs of recovery in all sectors.

Industrial market update Q4 2021

Rental growth continues to rise, hitting 7.2% a year in Q4 2021. Industrial space under construction is at the highest level ever recorded.

Office market update Q4 2021

Large year-end London office deals show confidence in the outlook, but TfL passenger volumes took another hit from Omicron in December.

Retail market update Q4 2021

Slide in retail rents halts, but inflation and interest rates pose a threat as cost-of-living bites.

Retail market report Q3 2021

Retail capital values over the last three months have grown by 3.2% (the strongest quarterly rate since 2010) with values stabilising across all retail segments.

Office market report Q3 2021

There are emerging signs of polarisation in the office market between top spec buildings versus those of a lower quality.

Industrial market report Q3 2021

Industrial investment flows are now not only ahead of the same period in 2020 but also significantly ahead of 2019 levels, driven by the continued strength of investor interest in the logistics sector.

Retail market report Q2 2021

Retail yields have repriced as average UK retail yields are now 6.8% which compares with 5.3% five years ago.

Office market report Q2 2021

Financial service companies are seeking out the best model for hybrid working, with 79% of financial service firms surveyed by CBI/PWC in Q2 2021 reassessing their workspace needs and 82% are planning on implanting hybrid ways of working.

Industrial market report Q2 2021

Investment volumes in the industrial sector over last 12 months increase by 75% as investment levels in the sector have soared.

UK retail market review Q4 2020

Internet sales are 56% higher than they were in February 2020. Non-food store sales are 27% lower than at the start of the pandemic however, despite this, traditional retailers are continuing to grow their online presence and shrink their bricks and mortar portfolios.

UK office market review Q4 2020

UK office market more resilient than expected with declines in values less severe than commentators had predicted.

UK industrial market review Q4 2020

Demand for industrial and warehouse space is driven by the economic performance of the retail, logistics and manufacturing sectors.

UK retail market review Q3 2020

2020 has been a difficult year for bricks and mortar retail. It is a commonly repeated aphorism but nonetheless true that the pandemic together with Lockdown 1.0 and 2.0 have crammed five or more years of anticipated changes in markets into the last nine months.

UK industrial market review Q3 2020

The drivers of demand for industrial real estate will continue to evolve.

UK office market review Q3 2020

Structural changes effecting the UK office market will play out over several years.

UK office leasing review Q2 2020

Coronavirus leads to dramatic declines in leasing activity.

UK office investment review Q2 2020

Transaction volumes decline during lockdown.

UK retail leasing review Q2 2020

Landlords and tenants shared the strain of pandemic lockdown. COVID-19 is accelerating the trend in the shake-out of retail.

UK industrial & distribution review Q2 2020

Transaction volumes declined during lockdown, with investment into distribution most favoured.

UK retail investment review Q2 2020

Retail investment market shuts down during the COVID-19 lockdown.

London office market outlook summer 2018

Cluttons has released its London Office Market Outlook report for Summer 2018.

Related services

Business rates

Working for occupiers, developers, and landlords in London and nationally, we operate across office, retail, and industrial and logistics sectors.

Commercial agency

Agile and highly responsive in our approach we are ideally placed to advise you on buying, selling, leasing, or re-gearing your London and UK offices as well as other types of commercial and…

Commercial valuation

Our team of RICS registered valuers brings a wealth of experience advising property owners and lenders across the UK. We are experts in the broad range of commercial properties, undertaking…

Lease advisory

Our RICS registered valuers have market data access, insight and will value, negotiate, and resolve lease disputes on your behalf as well as advise on lease renewals, break notices and lease…