The UK commercial property space is undergoing significant transformation, with industrial spaces emerging as pivotal assets. This is driven by evolving business operations, technological advancements, and changing economic conditions.
If you’re a business owner or manager looking to find a new space, then you will want to know the current state, and what the future holds. Read on to prepare yourself.
The Rise of Industrial Spaces
In recent years, industrial properties have transitioned from niche assets to central components of commercial real estate portfolios. This change is largely due to the surge in e-commerce and the need for advanced logistics solutions. In 2024, the UK industrial property market demonstrated resilience, with take-up slightly surpassing 2023 levels and nearing the long-term average.
Key Trends Shaping the Industrial Property Sector
Several trends are currently influencing the UK’s industrial property market:
- Technological Integration
The adoption of robotics, artificial intelligence (AI), and smart logistics systems is transforming warehouses into sophisticated hubs. Automated storage and retrieval systems, along with AI-driven inventory management, are becoming standard, enhancing efficiency and accuracy. - Sustainability Initiatives
Environmental responsibility is increasingly prioritised, leading to a demand for properties that meet high ecological standards. However, achieving these standards poses challenges. By 2030, it’s projected that 80% of commercial properties in England could become unlettable unless they meet the government’s energy performance certificate (EPC) targets of rating A or B. Additionally, the growing focus on sustainable construction has impacted industrial and workshop-style developments. Many commercial landlords are exploring ways to repurpose and adapt industrial spaces, drawing influence from residential property development models that use workshop sheds for multi-functional spaces. - Investment Growth
The industrial sector has attracted significant investment. In 2024, investment in UK commercial real estate increased by 20% compared to 2023, with the industrial sector leading in investment during the fourth quarter.
Industrial Space Costs: Market Rates & Pricing Considerations
Understanding industrial rental costs is essential for businesses seeking the right space to support logistics, warehousing, or manufacturing operations. Prices vary significantly by region, and factors such as proximity to transport hubs, unit size, and property condition all influence final leasing costs.
For companies looking to scale their operations or establish a strategic distribution hub, finding the right balance between affordability and accessibility is key. Businesses must assess whether they require large-scale distribution centers, small urban units for last-mile delivery, or flexible spaces that can accommodate growth over time.
Companies aiming to find the perfect industrial unit to rent should prioritise well-located properties with strong infrastructure and lease flexibility. Locations with easy access to major highways, ports, and logistics hubs can significantly enhance supply chain efficiency and reduce operational costs.
| Region | Average Prime Rent (£ per sq ft) |
| London (Heathrow) | 27.50 |
| South East | 14.50 |
| Midlands | 7.00 |
| North West | 6.50 |
| Scotland | 6.00 |
Data sourced from Colliers’ UK Industrial Rents Map.
It’s important to note that these figures represent prime rents for large distribution warehouses over 100,000 sq ft. Factors such as proximity to transport hubs, property condition, and local market demand can influence rental rates.
Beyond cost, lease terms and contract flexibility play a crucial role in decision-making. Businesses experiencing rapid growth or seasonal demand shifts should seek short-term leasing options that allow them to scale efficiently without excessive long-term commitments. Meanwhile, companies focused on long-term operational stability may benefit from securing longer leases with favorable fixed rental terms to mitigate future cost increases.
Regional Insights
Investment interest varies across regions. In 2024, the East Midlands and London experienced the most significant increases in demand for commercial property investments. The industrial sector, in particular, saw record demand, with a 72% increase in investment interest compared to the previous year.
The Role of Logistics & Supply Chain in Industrial Property Demand
The logistics and supply chain sectors are primary drivers of industrial property demand. The rise of e-commerce has intensified the need for strategically located warehouses to facilitate efficient distribution. In 2024, occupiers took up 9.3 million sq ft of industrial and logistics floorspace in Q3 alone, bringing the total take-up for the year to 26.6 million sq ft.
Proximity to major transportation networks, such as motorways, rail freight terminals, and ports, enhances supply chain efficiency. Businesses are increasingly prioritising locations that reduce transit times and costs, making regions with robust infrastructure highly desirable.
Challenges and Considerations
Despite positive trends, the industrial property sector faces challenges:
- Regulatory Compliance: Meeting stringent energy efficiency standards requires substantial investment and clear guidance from authorities.
- Supply Constraints: While demand remains robust, the availability of prime industrial spaces is limited, necessitating strategic planning for acquisitions and developments.
These concerns are not unique to the industrial sector. In fact, half of UK office landlords believe the commercial property market is already falling behind on meeting sustainability goals, raising concerns about future investment risks.
As industrial spaces face similar environmental expectations, property owners must proactively implement energy-efficient solutions to remain competitive and compliant.
Future-Proofing Industrial Spaces: What Businesses & Investors Need to Know
To remain competitive, businesses and investors should consider the following strategies:
- Embrace Technological Advancements: Investing in automation and AI can enhance operational efficiency. Upgrading facilities to accommodate these technologies is becoming increasingly essential.
- Prioritise Sustainability: Achieving high EPC ratings not only ensures compliance but also appeals to environmentally conscious clients and partners.
- Flexible Leasing Options: Considering both short-term and long-term leases can provide operational flexibility, allowing businesses to adapt to market fluctuations.
Conclusion
The UK’s industrial property market is dynamic, influenced by technological advancements, sustainability efforts, and shifting investment patterns. Stakeholders must stay informed and adaptable to navigate this evolving landscape successfully.