Logistics

January 2026 Forecast

Resilient occupier demand

Net absorption is expected to remain stable or slightly increase in 2026, as we anticipate interest rate cuts and falling inflation to boost business sentiment and consumer confidence.

As in 2025, third-party logistics (3PL)/distribution, and manufacturing and construction occupiers are expected to lead demand. This will be complemented by steady leasing activity from retail occupiers, particularly food.

Midyear review

• Despite a weakened macroeconomic environment in the first half of the year, net absorption performed in line with our expectations, rising slightly.
• Secondhand stock accounted for an increasing share of take-up in H1 2026, at 42% vs 32% in the prior three years. There was a notable reduction of new build-to-suit deals in the market, totalling 720,000 sq ft year to date.
• Third-party logistics (3PL)/distribution occupiers remained the most active in the sector, accounting for 45% of H1 2026 take-up. In line with expectations at the start of the year, the food retail sector has also seen strong levels of activity, with Farmfoods taking space in Daventry and Morrisons in Snodland – both reflecting an expansion of their current operations.

January 2026 Forecast

Reduced development pipeline

The logistics development pipeline in the UK declined throughout 2025. This is set to continue in 2026 as space currently under construction completes.

Most of the space under construction is for build-to-suit space, which, once completed, will increase occupied stock.

Midyear review

• The volume of new logistics space which completed in H1 2026 remained low vs recent trend. Totalling 6.2m sq ft, this is approximately half of what was delivered during the same period last year.
• 86% of the development completions in H1 2026 started speculatively, and the majority remained un-let at practical completion – thereby adding to the available stock in the market.
• Contrary to our expectation, new development starts have boosted the amount of space under construction to 19.9m sq ft (+6%). However, this increase was driven by build-to-suit (+8%), with the amount of speculative space under construction only rising by 1%. Build-to-suit now accounts for 66% of all stock currently under construction.

January 2026 Forecast

Improved fundamentals for vacancy rate

In line with most of the development pipeline being pre-committed, we expect the vacancy rate to remain stable or trend slightly upward in early-2026, but then fall in the medium-term, depending on how much secondhand stock is returned to the market.

Midyear review

• The UK vacancy rate remained stable in the first half of the year, in line with expectations. As of Q2, this stands at 7.13%.
• Availability grew at a similar pace in both new and secondhand stock. Newly completed speculative stock continues to account for just over half of all available stock.
• Outside of Scotland, the West Midlands records the lowest vacancy rate of any UK region at 5%, a figure consistent with levels seen at the end of 2025. Secondhand space accounts for nearly 60% of the stock available within the market.
• Conversely, the South West and South East recorded the highest vacancy rates of any UK region, at 9.4% and 9.1%, respectively. Both have risen over the last six months, driven primarily by newly completed speculative stock.

H2 2026 Outlook

Continued occupier momentum and development cost pressures expected to translate to vacancy rate compression

In the second half of the year, downside risks prevail. As well as a weaker GDP outlook, fit-out costs have increased. However, there is continued momentum in the occupier market. Expansion of new entrants from China, such as 3PLs and retailers, is encouraging existing occupiers to take space defensively. Meanwhile many continue to seek upgraded units that deliver improved efficiencies – a trend that is leading to an increased appetite for XXL units, particularly in the Midlands. The UK’s ‘defence-first’ agenda is also expected to generate new requirements for the sector. As such, we hold our outlook for net absorption, expecting it to remain stable or slightly increase vs last year.

Figure 6: UK logistics quarterly net absorption

The rising cost of debt and materials seen so far this year is expected to put further pressure on new development appraisals. Consequently, we anticipate fewer new starts and a greater focus on build-to-suit. The XXL segment of the market may prove to be the exception. With demand strengthening and supply constrained, the conditions required to justify speculative development are beginning to emerge.

Given the anticipated resilience of occupier demand and the relative dominance of build-to-suit in the development pipeline, our vacancy outlook remains unchanged. In the second half of the year, the UK’s vacancy rate is expected to fall slightly.

Figure 7: UK logistics vacancy rate