Industrial warehouse rents continue to rise by 1.1 per cent, while occupiers snapped up new build space in the first quarter of 2025, according to Colliers’ analysis of the first three months of the year.
The UK industrial and logistics market saw occupiers take-up focused on speculative new builds and build-to-suit units in Q1, with 73 per cent of lettings focused on this segment of the market – above the five-year quarterly average of 68 per cent.
Although take-up of 100,000+ sq ft units for the period was down in comparison to last year’s Q1 by 13.5 per cent, 6.3 million sq ft of space was leased – with the Midlands topping the chart for demand. Some 33 per cent of all activity was focused on the East Midlands, while 21 per cent was in the West Midlands. Yorkshire saw 19 per cent of the activity in the past three months, with the South West accounting for 15 per cent of lettings.
Len Rosso, Head of Industrial & Logistics at Colliers said: “We’re witnessing a sustained demand for prime space within the industrial market, which is continuing to push up rents, despite increased supply levels. While activity has contracted in Q1, we’ve still seen rents increase 1.1 per cent.
“The market is continuing to settle into a rhythm following the pandemic boom in demand and bust of warehouse supplies, and although there’s a higher amount of stock available – the focus for occupiers is on the premium products which are meeting the latest trends on efficiency, eaves heights and sustainability, as well as essential connectivity to road and rail networks.”
The availability of warehouses across the UK has increased to 51 million sq ft, with a vacancy rate of 7.6 per cent, up from 7.1 per cent last year. Of this space 57 per cent is Grade A, 32 per cent Grade B, and 11 per cent Grade C. While the proportion of Grade A stock has dipped from 64 per cent 12 months ago, it remains broadly in line with the five-year average.
Currently Colliers is tracking 8.4 million sq ft of warehouses under construction as of April 2025, with a further 2.7m sq ft completed in Q1.
Andrea Ferranti, Head of Industrial & Logistics Research at Colliers added: “We have forecast in recent years that new development starts would be more muted in 2025 and that is coming to fruition now. With second hand stock coming back online and supply of new speculative space slowing down, occupiers could find their hands being forced over the next 15 months to take up space in sub-optimum locations.”
Meanwhile, industrial investment volumes are down a third in comparison with Q1 2024, registering £1.4bn so far in 2025. With the majority of investments, approximately 60 per cent, stemming from overseas funds, whereas UK institutions accounted for just 15% of transactional activity – the lowest share in over a decade.
According to the latest data from MSCI (March 2025), industrial assets delivered three-month total returns of 2.3% on average. On an annualised basis, monthly observations show that total returns have remained positive since November 2023, topping 10.5% in March 2025. Annual capital growth turned positive in December 2023 and reached 5.3% as of March this year.
Michael Kershaw, industrial specialist and director in Colliers’ National Capital Markets team said: “Investor conviction in the industrial sector remains strong, as it has been over the last five years. However, elevated borrowing costs have narrowed the pool of active buyers in the UK. Those investors able to block out the noise and identify the right opportunities stand to benefit, as borrowing costs begin to come in over the next 12 months.”
