Warehouse construction drops

By Liza Helps, Property Editor, Logistics Matters

HOWEVER DEMAND from e-commerce giants Amazon and Chinese rivals such as JD.com grows – Amazon is behind the development of a 209,319 ft2 facility at EPTA and Stoford’s Axis Works scheme in Bristol, a 116,250 ft2 facility in Stockton on Tees as well as  a 2.3 million ft2 facility at Caddick’s EM.EX scheme  in the east Midlands, which is likely to start construction this year following planning approval at the end of last year. JD.Com through its real estate arm JINGDONG Property has recently acquired a 680,000 ft2 development plot in Leicestershire as well as a redevelopment opportunity in Wigan of circa 330,000 ft2

According to CoStar research industrial construction activity across the UK has fallen back with some 48.8 million ft2 currently underway, which is down markedly from a high of 68.7 million ft2 in 2022. The reduction reflects higher interest rates, elevated build costs and rising vacancies.

A steady decline in speculative development completions has been underway for the past year or so. Annual net supply additions peaked at 54.6 million ft2 in 2023, equivalent to 1.5% of inventory, however this  figure has fallen each quarter since then, with only 21.8 million ft2 delivered in the past 12 months. While completions are expected to pick up a bit in 2026 these will be held in check by the recent slowdown in groundbreakings.

Construction starts have been trending downwards since peaking in early 2022 with less than 30 million ft2 breaking ground in 2025, half the levels recorded at the peak in 2021–22 and a 12-year low.

Larger schemes that commenced last year followed commitments by occupiers such as Amazon and Nike, both in Northampton, though sector specialists such Panattoni and Tritax have continued to develop speculatively in response to a shortage of available units in the 400,000 ft2 plus size bracket. 

While construction activity has tailed off, a handful of markets have elevated vacancy rates due to recent development activity. This is likely to be temporary, as these same markets are well placed to capture tenant requirements as the pipeline thins. Milton Keynes is a good example. Its vacancy rate was recently the highest in the UK, but two large lettings by Chinese e-commerce giant JD.com took over half a million ft2 out of the market in mid-2025. Swindon’s already high vacancy rate looks set to jump up next year following Panattoni’s redevelopment of the Honda site where at speculative circa.950,000 ft2 and a 545,000 ft2 facility are due to reach practical completion soon. CoStar noted that with the US-headquartered developer’s track record, the rise is expected to be relatively short-lived.

ESG-focused refurbishments of older warehouses remains a key development theme. Despite hundreds of renovation projects over the past five years, it is estimated that around three-quarters of warehouses do not meet the minimum EPC C rating required by 2030 under the government’s MEES guidance. Properties falling below the threshold will then become unlettable.

Costar noted: “Fortunately for owners of older and energy-inefficient properties, the capital expenditure required to upgrade warehouses can often be significantly less than for offices. Measures such as installing LED lighting, improving insulation and using roof space for solar panels can all boost energy performance, as well as the rents units can command. The average asking rent among refurbished warehouses sized 50,000 ft2 and above has nearly doubled to around £8.50 per ft2 in the past five years.”