2025: Freeports, the year of the owner-occupier, automation?
2024 saw a wide variety of challenges for the occupier market; however, as demonstrated in the split of take-up, the sector is arguably more diverse than ever before in those taking logistics space in the UK.
Savills noted a particular rise in more bespoke occupier requirements coming to the fore, notably Nike investing in a state-of-the-art 1.3m sq ft new National Distribution Centre to solely service the UK, along with manufacturers, healthcare and, of course, the ever-continuing rise of the data centre sector.
Other major occupiers seeking expansion include the retail and supermarket sector, which gives positivity that this sector remains resilient but also with occupiers continuing to review and improve their supply chain, investment now in the right product, whether that being via size, specification and, in some instances, automation are becoming increasingly more apparent and further up their agenda.
ESG for occupiers is now firmly at the forefront of decision-making and requirements which will continue to lead towards occupiers requiring ‘best in class’, both to their investors and also their customers. Best in class also creates the opportunity to enhance the occupiers offering to their employees and to retain staff, and also the ability to attract new staff.
With pressure on the supply chain and the target to net zero in certain instances, delivery of the occupiers' business requirements remains paramount, and whilst there is a rise in vacancy in the UK, in some instances this vacancy does not meet the requirements of the modern occupier. With the hope that the viability of the build-to-suit (BTS) sector improves, this can allow occupiers to have confidence in both the delivery of their required building and also in line with their requirements. In some instances, location, timing and availability of oven-ready sites are not feasible and the occupier is forced to reconsider their strategy.
In 2025, we expect to see further challenges and also opportunities for logistics occupiers. Much is talked about the challenge of the rise in AI and, in turn, how this will require strategy to be reconsidered, particularly around automation and labour. This will return to the key building requirements of available utilities, building/site availability, and also future development opportunities. Occupiers investing heavily in automation will be looking for assurance that their chosen property can handle their requirements for the full length of their lease, not just on a five-to-ten-year period, such is the upfront cost of such automation and the payback period for such an investment.
We expect the attention to turn towards the Freeports and occupiers looking to maximise the incentives that are available in these locations. This, we expect, will have further attention from occupiers looking at multi-modal distribution and, as mentioned previously in the BSB, the increase of nearshoring and friendshoring we believe has commenced but will be a decades-long exercise to give occupiers supply chain resilience to global/economic challenges that they may face but also use of sea, rail and road.
Finally, as the logistics market continues to steady, opportunity for owner-occupiers where they deem fit, particularly manufacturing, could see a rise in owner-occupier freehold requirements. Such is the investment and bespoke nature of some of these projects, we anticipate that, where available, occupiers could now be bidding seriously to acquire major parcels of land as part of a long-term investment both into the UK and also a specific region. This, though, will again be dictated by the occupier's appetite for risk and also confidence in future availability of utilities and confidence in the planning policy to allow them to develop and invest to their needs.