Build: Perspective – Industrial & Logistics

Despite the current uncertain economic backdrop, demand in the UK logistics market continues to show resilience. Take‑up for units over 100,000 sq ft reached 33.6 million sq ft in 2025, up 15% year‑on‑year, and momentum has carried into early 2026, with 5.2 million sq ft under offer nationally. On the supply side, the flow of new space has slowed sharply, meaning availability has plateaued at around 63.7 million sq ft since Q2 2025. Space under construction has fallen from a peak of 21.6 million sq ft to just 6.5 million sq ft at the start of 2026 – a decline of more than two‑thirds. If sustained, this will lead to a tightening of Grade A supply over the coming year. Construction markets reflect these shifts. Lower development activity has increased competition between contractors and put downward pressure on tender pricing.

However, the renewed increase in energy costs is now exerting upward cost pressure. Rising transport and manufacturing costs, alongside fresh volatility in steel, concrete and specialist M&E component prices as a result of the Iran conflict, are all increasing uncertainty both in project pricing and programmes.

These pressures are feeding directly into already challenged viability assessments. Elevated financing costs and softer rental growth expectations had already made new‑build delivery difficult; the energy‑driven cost volatility is now prompting more schemes to be paused, redesigned or value‑engineered at early stages. Contractor insolvency risk has also re-emerged as a concern, with thin margins and greater exposure to material price spikes increasing caution among developers. Regulatory pressures are compounding these dynamics. The January 2026 BREEAM update and the full launch of the UKNZCBS have raised specification requirements, adding cost even as best‑in‑class ratings remain sought after by prime occupiers and investors.

The widening gap between legacy stock and rising ESG standards is prompting a growing shift towards refurbishment and asset repositioning. Recent data from the Savills research team highlights the case for refurbishment even further. The team examined 673 leasehold deals signed since 2020 where EPC ratings were available, including a mix of new and second-hand stock. The findings were consistent across regions, indicating that, on average, buildings with an EPC of A+ or A achieved a premium compared to those rated C or lower. At an aggregate level, this was 55% nationally.

The case for landlords to invest in retrofitting programmes is compelling. The data shows that retrofitting offers a clear chance to add value to existing assets, meet changing market expectations, and help create a more sustainable future. In a market increasingly influenced by ESG compliance and tenant demand, failing to upgrade risks assets becoming obsolete.

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