Caution creates complex and fragmented conditions

By Liza Helps, Property Editor, Logistics Matters

OCCUPIERS COULD be forgiven for thinking they are spoilt for choice with some 298 buildings over 100,000 ft2 available nationwide according to the latest Savills Big Box Briefing note, providing some 63.85 million ft2 of industrial and logistics space reflecting a vacancy rate of 7.78% and the highest level of supply since 2011.

Savills Head of EMEA Logistics Research Commercial Research Kevin Mofid says: “No region or size band has been immune to this rise in supply, and 58% of the total supply is considered Grade A.

“While 2025 saw the take-up of speculatively constructed space increase by 2.4 million ft2, that hasn’t been enough to alter the supply trajectory for brand new buildings, which now stands at 24.3 million ft2.

“Moving forward, 6.1 million ft2 of space is under construction speculatively, which will be added to the total supply throughout 2026 and into 2027, with a further 1.3 million ft2 being marketed and committed to starting on-site throughout 2026.”

Colleague Logistics Research Associate Lewis Rapley notes: “There are 111 units that are brand new and built speculatively across the UK – and quite a lot came to the market quite a while ago now – a spillover from the pandemic frenzy for speculative development that unfortunately came to the market just as it turned.”

“So right now,” he says: “it is not surprising that developers have put a pause on speculative announcements and new development because there is a lot of it in the market and it needs to be absorbed first – you’d be brave to pump anymore.

“Obviously the speculative pipeline has not dried up completely, but it has substantially reduced compared to where it was in 2022 – a single quarter’s speculative development starts hit 6 million ft2 during that year – roughly what is currently on site and under construction for 2026 a fall of 65% from its peak.”

According to DTRE’s Head of Research, Data & Insights Robert Taylor: “This is the least amount of new product delivered to the market in over ten years.”

Looking at the wider market including midbox units from 50,000 ft2 Knight Frank’s Head of UK & European Industrial Research Claire Williams notes: “At the end of Q3 2025, there were 53 units speculatively under construction compared to a peak in early 2023 when there were 159 – so its come off quite sharply.”

For developer Firethorn’s Director and Head of Logistics, James Sanders the issue to speculatively develop or not is a matter of confidence. “I’d like to think we have turned a corner in terms of take up, but availability is somewhat skewed and there is an awful lot of space that is not fit for purpose or left over from the pandemic; any developer looking to speculatively develop in this market will have to understand its micro conditions, have laser focus and be forensic where actually committing to investing.”

A sentiment that Marq Logistics UK Managing Director Bruce Topley shares: “UK developers and investors are likely to take a prudent approach to speculative development as we go into 2026.”

Taylor says: “Supply side discipline has been a defining feature through 2025 [and into 2026]. Developers constrained by historic land prices, and flatlining rental growth and exit yields, have largely stepped back from speculative development.”

This a view echoed by Newmark’s Industrial & Logistics Analytics partner Will Laing: “In the absence of yield compression, capital growth in the UK warehouse sector has been subdued over the last few years. Combined with elevated build costs and a more cautious occupational sentiment, and the conditions for speculative development have weakened.”

For solicitor Forsters’ Commercial Real Estate Senior Associate Charlie Croft this is not a surprise. “Given there were a number of boom years in terms of new space (and grey space) on the market, it was inevitable that there would have to be some drop off in new schemes to compensate for this.”

What is interesting to note though is that much of this supply is focused on units sub 200,000 ft2 – a staggering 184 properties making up 61% of the total supply are in this size range according to Savills’ Rapley. “If you are looking for a property of 250,000 ft plus that is where it is going to sting a bit.”

He notes that in fact there are only 12 units available nationwide over 500,000 ft2 of which eight are secondhand. Looking at the speculative pipeline there are just three buildings currently under construction of that magnitude. Equation and BGOs’ 586,288 ft2 Matrix 586 warehouse in Bristol being marketed by JLL and Avison Young and Panattoni’s two mega warehouses at its Panattoni Park Swindon scheme on the former Honda works which include a 916,982 ft2 cross dock facility and 545,000 ft2 facility being marketed by Savills and DTRE.

Newmark UK’s head of National Industrial and Logistics Agency Charles Spicer says: “Demand for larger units is on the rise, there are a number of large scale requirements looking for a home while some may opt for build-to-suit solutions, others are looking for space immediately available.”

This is an area where developer Panattoni is particularly attuned. Head of National Development Oliver Bertram says: “Large footprint requirements are increasing; we have seen a positive shift in requirements heading into 2026.”

As well as the aforementioned mega warehouses at its 7.2 million ft2 Panattoni Park Swindon scheme, the busy developer has an immediately available 783,309 ft2 property at Panattoni Park Central A1(M) as well as sites in Coventry with planning for a 540,000 ft2 property, and in Warrington where it proposes a 675,100 ft2 facility.

According to Cushman & Wakefield’s Head of UK Logistics and Industrial & Retail Research Edward Bavister: “Big shed demand is back and while strategic land banking continues to take place, a number of developers and key schemes continue to hold back on speculative development, particularly for larger space.”

Property analytics firm CoStar’s head of research Grant Lonsdale explains: “Speculative development has concentrated on 100,000 ft2 to 300,000 ft2 units in established motorway corridors, where risk is easier to underwrite and exit strategies are clearer. That makes sense in the current funding environment, but it has left a structural shortage of large units (500,000+ ft2) in the best locations.

Building big units speculatively is a risky business.

According to the 9th annual Future Space report from Tritax Big Box and Savills, conducted in partnership with research firm Analytiqa, which canvases investors, developers, and occupiers in the UK logistics property sector, it was found that despite returning occupier confidence and a willingness by developers to build speculatively going forward, investors were reluctant.

It reports: “Investment in single-let logistics hit a five-year low in 2025, totalling just £1.6 billion. Demand was stronger for multi-let assets, but a scarcity of assets on the market suppressed investment volumes, which edged up from £7.3 billion to £7.7 billion in 2025. This left overall investment volumes at £9.4 billion last year, a decline of 13%.

“Whereas occupiers are relatively optimistic about current market conditions, investors are the most negative respondent group, with 36% citing that business conditions had worsened over the past 12 months. This negative sentiment perhaps explains some of the weakness in investment volumes.”

Notably, investment volumes in Q2 and Q3 took a significant hit from the uncertainty triggered by the Trump administration’s tariffs, and continuing geopolitical tensions in 2026 will likely be detrimental to investor sentiment.

One impact of this decline in sentiment is that while developers remain relatively bullish on development, investors are clearly showing an intention to reduce their exposure to speculative developments through forward funding. When asked if they are considering speculatively funding development over the next twelve months, 67% of investors answered in the negative.

As a result, the speculative development pipeline — which has tightened substantially over the last twelve months — is unlikely to increase significantly. Lower development completions will put pressure on supply and set the scene for a second supply crunch in the next decade.

Looking at developers’ speculative development intentions over the next year, the report notes 38% plan to develop more in 2026, up from 32% in 2025. With that said, the share of developers saying they would develop less speculative space has also risen from 18% to 25%. In addition to investors being less willing to forward fund speculative development, this suggests that there will be more activity from balance sheet-driven developers, while those reliant on external financing may struggle to realise their ambitions.

Developers show the strongest interest in big-box units of 100,000–250,000 ft2, with 40% focusing on this size band. Mid-box units of 50,000–100,000 ft2 follow closely at 38%. Occupier demand mirrors this pattern, with 39% targeting 100,000–250,000 ft2 units and 28% seeking mid-box space.

The divergence becomes more pronounced in the larger size categories.

While 12% of developers are considering units of 250,000 – 500,000 ft2, occupier demand is notably higher at 22%. At the very largest scale—units of 500,000 ft2 and above—developers and occupiers are aligned, with 10% of each group targeting this size bracket.

However, sentiment and action do not always align so for many occupiers the build-to-suit route has to be explored.

It is also interesting to note says investor developer Cain Managing Director and Head of Industrial & Net-Lease Jon Strang that: “Even when options exist, occupiers often choose build-to-suit for very specific operational requirements or to lock in space for future plans. It’s not just about quantity. Quality, location and operational suitability are what really matter.”

Indeed during 2025, there was a bit of a build-to-suit resurgence albeit funded through the balance sheet developers or where financial backing was already locked in place for large scale schemes.

Investor developer Prologis had singular success securing five build-to-suit deals totalling some 2.5 million ft2. These included three at its 7 million ft2 RFI DIRFT III scheme in the East Midlands a 1.3 million ft2 build-to-suit with retailer M&S, a 273,820 ft2 facility for XPO to serve an ARLA dairy contract and a 217,785 ft2 build-to-suit warehouse for online furnisher and ecommerce homeware brand Laura James. In addition, it is progressing a 640,000 ft2 BREEAM Outstanding and an EPC A + rated build-to-suit for Palletised freight operator Palletways UK at Fradley Park, Lichfield in the West Midlands as well as a 64,390 ft2 build-to-suit for fencing product company Birkdale Sales at its Prologis Park Coventry scheme, also in the West Midlands.

Developer trader Stoford has picked up some Amazon build-to-suits [although these have yet to be officially announced] in Swansea (134,172 ft2) and Bristol (209,319 ft2), with the Bristol facility part of the wider 101 acre Axis Works scheme in funded by Canadian real estate development and investment firm Epta Development Corporation (EDC).

EPTA and Stoford are also developing the new £74 million 390,000 ft2 M&S logistics facility at Axis Works on behalf of LondonMetric Property Plc, which is pre-let to M&S on a 20-year lease.

Amazon has been busy with other design-and-build projects in the UK during 2025 – some acknowledged others not – these include a 120,000 ft2 facility in Cardiff (acknowledged) with ports operator ABP, a 116,250 ft2 delivery station in Stockton-on-Tees (acknowledged) as well as proposed design and build delivery stations currently going through planning that include a 100,000 ft2 facility at Chiverton Cross interchange on the A30 dual carriageway in Cornwall, and a 134,548 ft2 facility in Ely in Cambridgeshire. Planning approval has been claimed for a 164,505 ft2 delivery station at Canadian real estate company Brookfield’s site in Stoke on Trent (formerly the Pets At Home logistics depot off Stanley Matthews Way). The largest build-to-suit in 2025 for Amazon is the 2.399 million ft2 capacity multi-level state of the art warehouse set to be built at Caddick Developments’ 4.5 million ft2 EM.EX Worksop scheme in the East Midlands.

Other notable build-to-suit developments brought forward in 2025/2026 include Tesco’s 880,000 ft2 warehouse at DP World’s 10 million ft2 + London Gateway scheme in the Southeast as well as a 408,000 ft2 cutting-edge, state-of-the-art freight distribution hub in Leicestershire for Pall-Ex being brough forward by developer Barberry. Parcel delivery firm DPD is pursuing a bespoke 344,240 ft2 cross dock warehouse at St Francis Group’s 1.7 million ft2 Logic 54 scheme in South Staffordshire.

According to JLL’s director Industrial & Logistics Tessa English: “A total of 18.3 million ft2 of new space was taken up in 2025 of which 53% involved built to suit deals with the remaining 44% in speculative buildings which were either built and immediately available or under construction.”

Developer Trammel Crow Company Senior Vice President and co-head of the UK Development team Dan Rees says: “The more automated the supply chain becomes, the more likely they’ll need to take bespoke units.”

CBRE’s UK Industrial & Logistics Head of Capital Markets, Jack Farmer agrees: “Occupiers are increasingly favouring highly strategic, longterm, operationally optimised buildings that align with their specific business needs.

Developer HBD director David Nuttall, agrees: “We have noted an increase in occupiers looking for more specific requirements, which is likely driven by a combination of factors including greater weighting of manufacturing and processing enquiries and a drive toward automation. However, the basic requirements remain the same – namely is it high enough, is there enough power, is it easily accessible and how soon can it be ready to move in.

Farmer adds: “This high specification often requires a longer planning horizon, making buildtosuit development the preferred route. While buildtosuit can deliver exactly what occupiers need, funding remains challenging, and investor demand for the very largest unit sizes is often uncertain.

“As occupiers become more sophisticated and their operational needs more clearly defined, the disconnect between what they require and what investors prefer has become more pronounced.”

However, says Strang; “While Build-to-suit still works, it’s more selective now. Rising interest rates, higher investor yield expectations, and the delayed return on investment mean speculative space is often faster, simpler, and more cost-effective, unless a company has very specific operational needs.

“The balance has shifted as occupiers increasingly focus on certainty, speed and value. High-quality speculative space delivers all three, making it the go-to option in today’s market and leaving build-to-suit for more specialised cases.

“The entire market has raised its game, but large speculative buildings have evolved the most. Buildings of 400,000 ft2plus now have 18m clear heights, higher racking, smarter layouts, better energy performance and are designed for automation and operational efficiency. Even standard speculative units are starting to feel closer to bespoke in how they support occupiers.”

“High land and construction costs, combined with elevated investor yield expectations, have made build-to-suit much tougher. That reinforces the value of well-located, high-quality speculative space, which can deliver speed, flexibility and modern operational standards for most occupiers.”