Thought of the Week
How are lease terms evolving across the UK’s Industrial and Logistics markets?
May 15, 2025 4 Minute Read
UK Industrial and Logistics development accelerated between 2020-2022, adding 86 million sq ft to the market. The sector’s rents continue to grow, albeit at slower pace than seen in recent years. According to CBRE’s UK Monthly Index, UK industrial rents grew by 5.0% throughout 2024, following growth rates of 10.3% in 2022 and 6.9% in 2023.
But how do lease terms differ by building age within the UK industrial and logistics markets? In this week’s Thought of the Week, we dive into I&L deals transacted between 2015 and 2024 to examine how market dynamics have affected lease lengths and achieved rents across buildings constructed pre- and post-2015. Properties constructed post-2015 tend to feature more modern specifications, such as higher eaves heights and larger access yards.
Figure 1 shows that most properties, across both construction bands, achieved rents between £5.56-£10.50 per sq ft. However, older properties are much more likely to achieve rents in the lower band of £1-£5.55 per sq ft (36%), compared with 12% for properties constructed post-2015.
Figure 1: Rents achieved by construction bracket
However, Figure 2 illustrates that properties constructed post-2015 have consistently commanded higher rents than older stock, across all time periods analysed. Additionally, the gap between the two building categories has widened in the deals completed from 2023 onwards.
Figure 2: Average rent by deal year range
Over this period, the average rent for more modern stock has been £2.90 per sq ft higher than those constructed prior to 2015. This trend suggests that there is a group of occupiers willing to pay higher rates for updated specification, despite an overall increase in vacancy within the sector.
Lease lengths for the buildings constructed pre-2015 and post-2015 are comparable over the 10-year sample period (14.5 years vs. 14.4 years). However, lease lengths have diverged based on transaction year, with older buildings now seeing shorter lease lengths post-2020 as illustrated in Figure 3.
Figure 3: Average lease length by deal transaction period
Although newer buildings command higher average rents, lease lengths for these properties aren’t significantly longer compared with older assets. However, the gap in average lease length between older and newer assets has narrowed since 2023. Not all occupiers demand modern logistics space, and current rental levels may be suitable for investors depending on their investment objectives and asset location. Nevertheless, current rental conditions indicate there are opportunities for investors and landlords to upgrade older assets (constructed pre-2015) to potentially achieve better lease terms.
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