Industrial sector dominates UK commercial property demand

Recent data from EG’s Propertylink October Demand Barometer reveals a growing trend: the industrial sector continues to outpace other commercial property types in enquiries. This surge highlights a shift in occupier priorities, driven by evolving market dynamics such as the boom in e-commerce, advancements in technology, and the growing need for logistics and warehousing.

This is backed up by data from Savills, which reported that take-up of industrial and logistics space in the first half of 2024 surpassed the five-year average, with a notable surge in demand for smaller units under 100,000 sq ft.

Another significant driver is the growth in urban logistics. Research from Knight Frank indicates that ‘last mile’ delivery hubs, particularly those within proximity to densely populated areas, have seen record-breaking demand.

For property developers looking to expand, this could present a significant opportunity to align their portfolios with market demand.

What’s Driving Industrial Property Demand?

The sustained demand for industrial spaces can be attributed to several key factors:

E-Commerce Growth

The pandemic accelerated the shift towards online shopping, and this trend shows no signs of slowing down. Retailers and logistics companies are seeking more warehousing and last-mile delivery hubs.

Reshoring and Nearshoring

With global supply chain disruptions, many businesses are bringing manufacturing and distribution closer to home, fuelling demand for industrial sites.

Sustainability Goals

Companies are looking for energy-efficient buildings, often turning to new industrial developments to meet their ESG targets.

How to capitalise on the growing trend?

There are many ways to make the most of these opportunities. If you are agile and can move quickly, you turn around projects faster than some of the larger competitors. You have the flexibility to take on projects that larger developers might overlook such as converting underutilised or brownfield sites into industrial spaces. This not only addresses the shortage of available land but also aligns with the government's push for urban regeneration.

Regional growth areas are becoming attractive alternatives to traditional industrial hubs, offering developers the chance to tap into emerging markets. By incorporating sustainable building practices, such as energy-efficient designs and renewable energy solutions, you can attract tenants who prioritise environmental responsibility, potentially commanding higher rents and long-term leases.

The trend toward sustainability also offers a competitive edge. Industrial occupiers are increasingly looking for energy-efficient buildings to meet their ESG commitments. Developers who invest in green building practices, such as incorporating solar panels, energy-efficient HVAC systems, and sustainable construction materials, can attract high-quality tenants and potentially secure government incentives.

The industrial sector’s dominance in the UK commercial property market shows no signs of waning. As demand continues to grow, driven by e-commerce, reshoring, and sustainability goals, the opportunities for developers are immense. However, capitalising on this trend requires a clear understanding of market dynamics, strategic site selection, and expert legal guidance.

For those ready to embrace the challenges and opportunities of the industrial property market, the rewards could be substantial. With the right support, developers can build resilient portfolios that meet the needs of modern occupiers while contributing to the UK’s economic and environmental goals.