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As we reflect on the UK office market over the past year, it’s clear that the story of the UK office market has split into two distinct narratives which will continue to shape the industry in 2025. Last year, the market saw prime A-grade offices in London and key regional cities thrive, buoyed by rising occupier demand and the race to meet modern sustainability and design standards. In stark contrast, ageing offices in the Grade B class were slipping into obsolescence with little interest in upgrading them.  

The result was a market with no spectrum, no middle ground between the Greenest and Newest and the Greyest and Oldest. For landlords of these older properties, it’s not all doom and gloom. As we look ahead to this year, there is continued opportunity to reimagine these spaces for entirely new uses. Through repurposing for high-demand sectors like Build-to-Rent (BTR), purpose-built student accommodation (PBSA), and even senior living, there’s a promising path forward for those willing to embrace the transformation. 

2024 Recap: The growing divide between Grade A and Grade B  

The contrast between the thriving demand for Grade A offices and older, less flexible Grade B buildings became more pronounced last year. The divide has been starkly evident with the office market having collapsed during the pandemic unlike anything seen before. However, as pricing bottomed out, activity in the Grade A market is rebounding strongly. The pandemic reinforced the importance of the office as a concept, but it also raised the bar: occupiers have now demanded the best quality and green credentials, viewing these as essential for staff retention and attraction. 

The “Big 6” cities such as London, Bristol, and Manchester have led the charge in recovering occupier activity, with Grade A offices accounting for 80% of total take-up last year. Not only that, but they’ve also seen prime rents soar in the last five years. It took nearly 20 years for average prime rents to rise from £20 – £30 per sq. ft. By contrast, the climb from £30 to over £40 per sq. ft occurred in just five years, reaching this milestone in 2023. Markets such as Bristol have already achieved rents of £50 per sq. ft, while Oxford and Cambridge have seen deals exceeding £60 per sq. ft in the past year.

Figure 1. Prime regional Big 6 office rents 

The divide is not just between Grade A and Grade B but also between the Big 6 cities and regional offices. Whereas the “hub-and-spoke" model has largely fallen flat, with many regional offices now destined for obsolescence, these strides of confidence to Grade A in the Big 6 are, in DTRE’s view, something to follow suit sooner than later. These offices have hit the trough of the latest cycle, signalling the time for decisive investor action. 

On the other end of the spectrum, Grade B buildings have faced a different investor landscape, having been hit hard by rapidly transforming sustainability standards and tenant expectations. Minimum Energy Efficiency Standards (MEES) regulations were updated and now require commercial properties to hit a C rating on their EPC by 2028, and B rating by 2030. 

A-grade offices remain relatively unharmed by this, while Grade B buildings are struggling to keep pace. The trends of last year suggest older builds might head down a path to obsolescence as they face a more unstable market, with occupiers demanding greater sustainability and flexibility. Owners remain willing to refinance Grade A assets driven by confidence in their future value, but the same cannot be said for Grade B properties. The uncertain future of these ageing assets deters reinvestment, which will leave them increasingly sidelined in the year ahead.

But there’s an upside to this downturn, and this has been found in repurposing obsolete office spaces for high-demand, resilient sectors BTR, senior living and PBSA. As we head into 2025, these conversions are likely to remain a key trend as many landlords are expected to explore how Grade B offices can be transformed into vibrant properties.

These conversions, which don’t have uniquely specific infrastructure requirements, are among the most feasible options for repurposing office properties. The approach also aligns with Local Authorities' growing preference for a ‘retrofit first’ model to prioritise sustainability, and with the UK government’s housing strategy, with regulations that further eased repurposing last year.

Repositioning offers a cost-effective, adaptable strategy for transforming outdated offices into valuable assets again. In fact, ourselves at DTRE are involved with landlords in markets like Oxford and Cambridge who are exploring residential or student housing office conversions.  

This won’t work for every Grade B and below office in every location but, for many, it will provide a valuable alternative to sitting, waiting and hoping on a dramatic up-turn in the UK’s office market at large. 

Senior living is a sector that is often overlooked but holds significant potential for office landlords to explore. Leading doctors have repeatedly warned that our ageing population represents one of society’s greatest challenges, but it also offers investors one of their greatest opportunities. With the number of people aged 80 and over projected to rise by 71.5% by 2042, demand for well-located and well-equipped senior living facilities is expected to soar. That Grade B office may look grey and old, but it could hold untapped potential worth its weight in gold.   

The UK office market has reached an inflection point. Looking to 2025, the focus on sustainability may continue to attract major investment for A-grade, glistening offices in the premium pockets of London, while secondary offices are still caught in a market slump, proving difficult to sell. The absence of a middle ground in demand for non-Grade A have prompted a necessary evolution. This is further reflected in rent incentives for new office lettings. Best in class office rental incentives have remained constant, with net effective rents sitting at 85% - 90% of the headline rent whilst Grade B accommodation is sitting at 70% - 80%. This further demonstrates the polarisation of the market. 

Repurposing obsolete offices into high-demand sectors allows landlords and investors to stay one step ahead: aligning with sustainability goals and meeting the needs of a shifting population – both routes to capitalising on long-term value. Embracing these conversions can revitalise properties that might otherwise be written off, extending asset lifespans and repositioning those landlords – currently on the backfoot – at the forefront of real estate’s evolving landscape. The trends of 2024, including adaptability, sustainability and the potential for repurposing obsolete assets, will continue to shape success in the year ahead. 

From Boardrooms to Bedrooms and Desks to Doctors: Reframing the Value of Offices

Donald Trump won the US Presidential Election and is now set to become just the second man – after Grover Cleveland – to serve two non-consecutive terms as President. Whilst there’s a multitude of various policies Trump ‘might’ enact, from abortion to the Ukraine War, for the purposes of this piece, we will focus on what Trump means for markets, commodities and real estate in the more immediate and medium term and the follow through impact, if any, it will have on the UK.

What is the much talked about ‘Trump Trade’? Trump has promised to ‘end inflation’, cut taxes and interest rates, reduce immigration and put a tariff of 10% to 20% on all imports, a tariff of 60% or more on imports from China, and tariffs of up to 100% on some imports from Mexico. 

But how realistic are these goals and will they instead produce higher inflation and higher interest rates?

Whilst tax cuts will boost consumer spending, that will in turn put upward pressure on prices as more money chases the goods and services available, while simultaneously cutting immigration and deporting illegal immigrants will cut the supply of labour and mean that wages in the US push higher. Finally, the introduction of tariffs on imported goods will also increase prices for consumers. All these inflationary measures will mean Jay Powell at the Fed will be unable to increase the cadence of any interest rate cuts. 

Given Trump’s focus on trade tariffs then expect sectors tied to international trade – particularly tech, shipping and consumer goods to experience a degree of volatility. On the other hand, the president-elect’s emphasis on deregulation and corporate tax cuts may well give short-term boosts to industries like traditional energy, financials, and defence. Whilst his chief-supporter, the world’s richest man Elon Musk has seen shares in Tesla shoot up 55% in the last month.

Overall, the evidence suggests that the choice of president has little influence on Wall Street and the focus will instead remain on earnings.

Limited carry across to UK equity markets. The FTSE 100 (- 1.40%) and FTSE 250 (+0.07%) have hardly moved since Trump’s victory. In contrast, the S&P500, the Nasdaq Composite and the Dow Jones are all up north of 2%, having originally risen more than 5%.

Industrial metals, particularly copper, silver, and iron ore were the major casualties from Trump’s victory with Trump’s proposed trade tariffs being immediately viewed as a negative for the sector. 


Whilst tariffs may take months to implement, the commodities sector has been looking to China for additional measures to support its troubled economy. However, hopes for a significant stimulus were dented after a week-long meeting of China’s NPC delivered little in terms of fresh initiatives, leading to further fresh weakness.

Turning to oil, the OPEC+ group of producers may face increased challenges in 2025, not only from Trump’s “drill, baby drill” stance but more importantly from a weak global economic outlook and the energy transition, which is now seeing Chinese demand close to peaking.

The initial negative price response should cover the near-term risks, and Trump’s infrastructure spending plans and potential deregulation could end up boosting demand for metals in the medium to long term. Additionally, the last time Trump imposed tariffs on China, it took almost a year before implementation, and a similar timeframe or a watered-down version may limit the overall impact. Sluggish global demand and rising US stockpiles should limit price increases in oil in medium term.

One of the most obvious reactions to Trump’s victory has been in US Treasuries. Prior to Trump’s victory the US yield curve was gradually normalising as the Fed proceeded with rate cuts. However, now yields have jumped amid the potential for economic reacceleration in 2025 due to Trump’s policies and therefore expectations of higher interest rates from the Fed to counter it (and this explains the rise in the yield on American government bonds in the last 12 days see chart below).


Trump’s victory will likely keep the Federal Reserve cautious about its rate-cutting trajectory.


Higher inflation and interest rates in America don’t automatically mean the same here but investors who know they can make 4.5% from US government bonds may decide that they won’t accept a substantially lower yield from the British equivalent, gilts. Gilt yields affect other borrowing costs such as mortgage and swap rates and so the re-election of Donald Trump may mean a higher cost of debt on this side of the Atlantic, all else being equal.

The relationship between Trump and the Fed will be critical to establishing the success or otherwise of commercial real estate under his leadership.


The US already has significant problems in its office markets, particularly downtown locations with significant levels of vacancy and continued interest rates and bond yields at >4.5% could mean it’s a relatively painful 2025 in the US commercial real estate sector. 


If Trump’s tariffs come into full force then expect more reshoring and re-location of production both in the US but also in Europe, with a chance that the new US protectionist policies might actually end up supporting demand for European and UK manufacturing and logistics warehousing.

From a capital markets perspective, a resurgent US economy and strong dollar will make UK assets look relatively cheap and therefore could usher in a new wave of US Private Equity led investment, albeit the cost-of-capital will remain high, relative to the previous cycle. 


Whilst Europe will look cheaper than the UK from a debt perspective, with German GDP expected to contract in 2024 and a general election in 2025, the French undertaking €60bn worth of tax rises and spending cuts and Italy’s economy forecasted to grow at half the rate of the UK in 2025, then the UK still looks a solid bet.

In terms of leasing, trade barriers and a further period of supply chain disruptions, which the experience of Brexit and Covid tells us, can ultimately lead to more demand for warehousing.

The UK’s life science sector could stand to benefit from the uncertainty created by Trump’s appointment of Robert F. Kennedy Jr., who’s pushed false claims about vaccine safety and has been nominated to be the new US secretary of health and human service. In that instance, the UK could be seen as a more business-friendly climate for life science companies, particularly those undertaking drug discovery.


Whilst the listed pharma businesses have all seen declines in their share price since the nomination of RFK Jr, that is largely to do with sales and the potential disruption to a market of over 330 million people. On the flip side, a more business friendly location could attract ‘Big Pharma’ with the associated boost to real estate, chiefly leasing of lab space.

Trump 2.0

The election was certainly one to remember. The Tories achieved the fewest number of seats in their recent history and Labour’s vote share was the lowest ever to have secured a majority. Backed by just a third of the electorate, but labelled a landslide nonetheless.

’ manifesto to see what this all means for the real estate sector and the sustainability agenda at large. Starmer has vowed to change Britain, but are his promises achievable? 

The manifesto pledged the introduction of an Energy Independence Act, aiming to achieve a zero carbon electricity system by 2030. This week, the King’s Speech referred to the ‘Global Climate Challenge’ and our government’s desire to achieve this energy independence. 

During Q1 2024, renewable energy accounted for over 50% of total generation, contributing more than gas for the second consecutive quarter. However, to reach Labour’s ambitious target, there is a long way to go. Installed renewable energy capacity was 49 GW in Q1 2024 and Labour are looking to grow this to 150 GW by 2030. 

To achieve these targets, renewable capacity in the UK will need to grow by 21% annually to 2030 – far higher than in recent years. If Labour do accomplish this, it will be a remarkable achievement: the fastest growing grid decarbonisation in Europe.

UK renewable growth in the past six years and projected for the next six years:

The UK has a huge solar opportunity yet is falling behind neighbours like the Netherlands and Germany where financial benefits for installing PV is encouraging major growth. Unchecked, this gap is likely to grow as the European Energy Performance of Buildings Directive (EPBD) continues to boost solar capacity across EU Member States. 

The UK has the second largest offshore wind capacity in the world, representing 40% of the European total, with offshore wind output of 49TWh saving the equivalent of 18.5m tonnes of CO2 emissions last year alone.

The new government has promised to improve the planning process for infrastructure projects to progress pipeline projects. Greener energy means greener real estate, and businesses in the sector would welcome a helping hand in achieving their own net zero ambitions.

Ed Miliband has returned to Cabinet as energy secretary having held a similar role from 2008 - 2010. Sources claim he ordered an immediate ban on new North Sea drilling licences but, rest assured, these are merely rumours. The government will only halt new licences for new fields. 

Restricting fossil fuel growth in the North Sea is a welcome policy from a sustainability perspective but, given the UK’s low coal supplies, this may leave us vulnerable in cold winters. To accompany this policy, the government has also agreed to extend the Energy Profits Levy which will help with much needed energy rebalancing. 

The UK is the first major economy to more than half their output: reducing CO2 by 53% between 1990 and 2023. At a reduction of 428 MtCO2e, it’s more than the emissions reductions of the US, Canada, France, Italy and Japan combined.

However, the UK is only halfway to achieving its 2050 net-zero target. Just yesterday, the UK’s Climate Change Committee 

 that the UK’s targets were at risk, urging the new government to rollback Conservative green energy reversals “as a matter of urgency”. With policy pending, what will future forecasts really look like?

The manifesto also refers to the UK becoming ‘the green finance capital of the world’, naming institutional investors and encouraging FTSE 100 businesses to implement net zero plans. We’ve already seen the emergence of Impact Funds in the UK real estate market, aiming to make beneficial social or environmental change alongside returns. 

We expect this ESG-related pool of capital to grow significantly and the market to become increasingly sustainable investment intelligent. Costed decarbonisation strategies are already creeping into transactions, in part to safeguard assets from evolving EU legislation. We expect the UK regulation horizon to align with European (CSRD) or international regulations (ISSB).

For the logistics sector, the National Grid is the single biggest 

. Labour dedicated a section of its manifesto to address this and the King’s Speech reinforced its importance by referring to the creation of Great British Energy (GBE): a new, publicly-owned clean energy generation company that will co-invest alongside private capital. 

GBE will partner with energy companies, local authorities and cooperatives to develop up to 8GWs of cheaper, cleaner power by 2030, and upgrade infrastructure. While we commend Labour for being the only party brave enough to mention the grid, their methodology so far is unclear. 

It’s surprising that we have no further clarity on EPC deadlines. Labour has reversed the decision to waiver MEES for privately rented residential properties but seem to have forgotten commercial assets. For commercial property, this makes long-term planning and budgeting challenging and could lead to a retrofit rush when (or if) MEES deadlines become legislative. 

Labour has committed to restoring the 2030 ICE phase-out for cars, increasing the number of charging points, standardising battery condition information and allocating £1.5bn to new gigafactories. However, it feels like they’ve missed an opportunity in not mentioning logistics fleets, and by focusing their attention on cars rather than vans or HGVs. 

Overall, we are excited to see what the future brings. The Labour government’s sustainability targets are easily the most ambitious in Europe and would certainly bring about ‘Change’. Only time will tell whether the new government’s ambitions will come to fruition. 

Labour & Sustainability: Positive ‘Change’ for real estate, or more empty promises?

Surveyor

Will Elvidge

Labour’s new planning and housebuilding proposals will boost demand for space and increase rental growth in the country’s logistics market, write DTRE’s Robert Taylor and Will Elvidge.

Fresh off the largest parliamentary majority in a generation, Prime Minister Keir Starmer has vowed that “growth is Labour’s number one priority for government.” With a view to enacting this – and to assuage concerns of a “conspiracy of silence” about the structural, economic and fiscal issues bedevilling the nation (as levelled by the Institute for Fiscal Studies) – Starmer and Chancellor of the Exchequer Rachel Reeves have set their sights on reforming the UK’s antiquated planning system. 

Beyond the renters and prospective homeowners promised 1.5 million new homes, however, there is another group that stands to benefit from the construction boom Labour hopes its planning reforms will engender: investors in the UK’s logistics market.

New homes require new logistics hubs. Labour’s “strategic approach” to residential development, however, will squeeze the land available on which to build these facilities. For private equity and institutional investors, this spells both increased occupational demand and higher rents within the logistics sector – key metrics, and a prerequisite, for any investment decision.

In 2019, the British Property Federation estimated demand for logistics space increased by 6.4 square metres for each new home. This figure will have risen sharply since then due to the acceleration of e-commerce during covid and beyond. 

Online sales today account for 26.9 percent of total retail sales and are set to grow at an average of 7.8 percent annually between now and 2027, according to the British Retail Consortium. Crucially, rather than merely displacing and reformatting logistics demand from one sector to another, e-commerce requires roughly three times as much logistics space as that which services physical retail. 

To put this into perspective, Labour’s pledge to deliver 1.5 million new homes over the next five years is equivalent to circa 9.6 million square metres of new logistics warehouse demand, which could represent an additional 1.92 million square metres of new take-up per annum over the next five years.

Logistics real estate is therefore an unspoken element within the residential conversation, and as necessary for quality housing stock as transport connections or leafy green spaces. A housebuilding boom is a logistics boom.

Rising demand is not the only factor that will draw investors to the logistics market. Implicit within Labour’s promises are also reasons to believe that rental growth, which has risen precipitously in recent years, will continue and even accelerate.

Despite much speculation around Labour’s plans for the green belt – a policy to prevent urban areas spreading into undeveloped land – the government has been clear that so-called “brownfield” and “grey belt” space will be developed first. In reality, this will mean a further loss of the land that has traditionally been utilized by industrial and logistics occupiers, with last-mile operators in major cities especially affected. 

The experience of London over the preceding two decades is likely to be the nation’s writ large. Between 2001 and 2020, Segro estimates that 1,483 hectares of industrial space within the city was lost. It comes as no surprise, then, that since 2001, logistics rents within London have increased by 122 percent, according to MSCI. 

Should Labour’s planning and housebuilding policies further constrain industrial and logistics supply, rental growth for the sector should continue to rise, as new developments are driven further and further out of cities and competition for ‘super prime,’ centrally located assets heats up.

The new government has spent years courting private and institutional investors and, in just its first weeks in power, has promised “catalytic capital” to derisk private investment in critical infrastructure with social value. While logistics might lack the novelty of gigafactories, renewable energy or green steel, the sector is a significant driver of economic growth and ESG development. 

With politicians from all parties now acknowledging the need for a huge number of new homes in the UK, along with Labour’s landside majority, there is newfound confidence that critical velocity has been reached on the issue. Once the government moves from speech to action, we expect logistics real estate to enter the conversation. Even before it has, the attractions from an investor perspective are clear.

To read the article on the PERE website, please click the following link:


UK logistics set for private investment boom with new government

We stand on the cusp of an onshoring boom. In the face of higher costs and continued global supply chain disruption – driven by conflict and Brexit regulation, among other things – manufacturers and logistics outfits the world over are rushing to house their operations within key markets. The UK is no different.

According to one survey, 82% of UK manufacturers intend to increase the pace of onshoring in the next two years. On the logistics side, Nike – which previously serviced the UK from Belgium – in May launched its first standalone UK logistics site, a 1.3m sq ft hub in Corby. Inditex, meanwhile, agreed a deal for a 600,000 sq ft site in Daventry late last year, shuffling its UK operations over from Spain.

But it’s not always plain sailing. While the UK was the 19th century’s leading global manufacturer, much has happened in the past 200 years. Today, occupiers and developers face new challenges in bringing industrial and logistics sites back to these shores, with power supply being one hurdle that is repeatedly appearing.

At a time when markets are slow (but beginning to pick up), parties must find new ways to accelerate negotiations and get deals done.

As part of a recent DTRE survey, access to power emerged as the key issue facing occupiers in 2024, identified by more than 70% of the over 2,000 key industrial and logistics personalities surveyed (followed distantly by staffing issues, at 50%).

Manufacturing and logistics, naturally, is power intensive – more so than for the occupier uses that have dominated in recent years. With ever-increasing use of automation and robotics, too, the demand for power – even in smaller sites – is intense.

However, speculative developments are not being developed with power to meet this demand. Nobody wants to pay for power that isn’t being used – neither landlords in development nor tenants through standing charges. But it takes time and effort to meet these power demands – perhaps more so than is necessary.

China leads the way in terms of electricity production, producing 8,833 TWh as of 2022,  followed distantly by the US (4,510 TWh). While these hold little sway when it comes to onshoring, closer neighbours Germany (578 TWh) and France (473 TWh) are also out-generating the UK’s 325 TWh. Where occupiers can benefit from more readily available power sources, the UK risks missing out on the benefits of onshoring through the process of “friend-shoring”: moving sites to nearby states instead.

To avoid this, and to capture and capitalise on demand from high power users,  developers must reconsider their approach to meeting power requirements. For occupiers, it’s a fundamental requirement – one that it appears is currently an afterthought, and one slowing down deal progress.

While landlords and developers are looking at alternative renewable sources which align to their ESG strategies (for example, solar photovoltaics), this generally doesn’t provide the additional power to meet occupiers requirements.

This is not about future-proofing – these are issues already facing occupiers today

Instead, quotes and installation for the requisite power upgrades need to happen faster. At a time when deals are taking longer and longer, everyone must play their part in ensuring there are no further unnecessary delays.

For electricity suppliers, they must ensure that the grid is reliable enough to meet new demand, that upgrades can be implemented at speed, and that the necessary shift to renewables does not come at the expense of reliability and round-the-clock service.

Putting the power in Northern Powerhouse 

This is not about future-proofing – these are issues already facing occupiers today. The North West is a region with great potential to return to its history as a leading manufacturing hub, but in our experience, the gaps between power supply and demand are growing.

We have seen occupier requirements up to 16 times greater than those being delivered on speculative developments, which has created delays. Elsewhere, housing developers in west London were told that it would take “several years” for new electricity connections to be delivered, and a car park in Northamptonshire was put on a three- to four-year waiting list to power up its lighting and electric vehicle charging points.

Clearly, these are wider infrastructure challenges and the buck does not stop with developers. And that’s not to say that deals aren’t being done: we are currently advising on a number of leasing transactions where power increases are structured into a deal. However, this takes time and is further slowing down the already slow transaction process.    

It’s not all doom and gloom. Of those already engaged in the onshoring process, 90% report successful outcomes. It’s a driver of security and resilience, cost savings and emissions reductions, providing boosts to local economies and fostering innovation ecosystems across the UK.

For developers, reassessing their approach to power allocation will enable more high power users to return to the UK and see earlier rental returns on their assets. Lethargy has crept into elements of dealmaking within the industrial and logistics market – shaking off the cobwebs is a win-win.

By considering power at an earlier phase in their decision-making, developers and landlords can stand out from the crowd and meet rising demand for high power spaces.

Why access to power is more important than ever for logistics developers

Earlier this year, the World Economic Forum released its 19th Edition of The Global Risks Report. It showed that 5 out of 10 global risks in the next 10 years are expected to be climate related (up from 2 in the next 2 years) and illustrated that it is now more important than ever to safeguard assets against climate change. 

Technological advancements and policy updates mean that sustainable solutions are constantly being developed. With this in mind, I have included our top tips to futureproof logistics assets and maximise long-term value. 

The commercial real estate market is feeling the full effects of the energy crisis, primarily with challenges connecting to the grid and the impacts of increased energy costs for consumers. Considering renewable energy sources as an alternative to gas will reduce carbon emissions and safeguard assets against energy and legislative challenges. 

One solution is installing PV panels. With a roof that is ready for solar, there are four options: rent the roof to a third-party solar provider, feed the kilowatts into the grid, use the power to supply the asset, or store the power onsite. Pairing PV panels with battery storage will ensure round the clock power and offers a solution to potential grid connectivity problems. 

Battery technology is constantly improving and, as many occupiers are looking to electrify fleets and increase automation, power is becoming a key consideration that developers will need to address.

Perhaps one of the most significant changes to warehouse building design in recent years is how the local environment is considered. The new norm suggests that buildings make a minimal impact on their surroundings and biodiversity, yet it is increasingly a concern to local planning authorities and policymakers. 

No two local environments are the same. The Environmental Impact Assessment (EIA) is a useful tool for helping to navigate environmental needs and to assess the impact of a development project. By improving local biodiversity, there is an opportunity to accelerate planning processes and improve your license to operate.

Data is king! Any landlords, tenants, asset managers or developers reading this will have experienced the headache of data collection, particularly when it comes to resource consumption. It’s not an easy process. 

As it stands, occupiers are not incentivised to provide consumption data and, in some cases, it simply isn’t available. With the technological advancements of smart meters and the growing popularity of green leases, data management is improving. However, many are still sceptical about the accuracy of the data and often the information received is highly technical and challenging to interpret. 

Consumption data is fundamental for understanding the energy performance of an asset and managing portfolio risks. A reputable collection system, providing accurate data, will help comply with regulations, influence asset management decisions and reduce a building’s carbon footprint.

Asset electrification is necessary not only to achieve Net Zero and decarbonise assets, but also to comply with imminent UK and EU regulations. The Energy Performance of Buildings Directive (EPBD) aims to phase out all fossil fuel heating by 2040, and for new buildings by 2030 (2028 in Germany). We expect clearer guidance from the UK Green Building Council's forthcoming 

, which is due to be published later this year, but both will provide asset-level performance requirements covering embodied carbon, operational energy, and several other Net Zero Carbon related metrics. 

Installing zero-emissions electric heat pumps instead of natural gas-powered climate control systems in warehouse units will not only ensure the building is compliant, but it is necessary for achieving prime rents, EPC accreditations and maximal long-term asset value.

To achieve Net Zero emissions and decarbonise the sector by 2050, embodied carbon needs to be reduced by 40% before 2030. The 

 suggests ‘buildings are currently responsible for 39% of global energy related carbon emissions: 28% from operational emissions… and the remaining 11% from materials and construction’. It is, therefore, no surprise that companies are endeavouring to find more sustainable alternatives to traditional build design and materials. 

The use of modern materials and construction techniques is expected to increase the life of a logistics asset from circa 25 years to 50+ years and dramatically reduce carbon emitted into the atmosphere. This can be achieved by using easily separable structures which can be replaced, materials that have a longer technical service life, reused or recycled materials, or materials that naturally absorb CO2. Modern technology makes new construction simple. 

There are many sustainable building certifications which provide a useful foundation for measuring sustainability. However, questions have been raised about their relevance for warehouse assets, with growing dissatisfaction around cost and the lack of correlation between certification and a building’s energy performance. These concerns are driving a shift away from current certifications in the wider real estate market, but they will no doubt be replaced by something else.

There is growing evidence, particularly in the UK, that higher EPC ratings achieve higher rents, shorter void periods and attract superior tenants. Today, MEES regulations require all non-domestic buildings within the UK to achieve an EPC rating of at least an ‘E’. Proposed legislation suggests that, from April 2027, all non-domestic buildings must achieve an EPC rating of at least a ‘C’, and a ‘B’ rating from April 2030. 

EU regulations are a little more ambiguous. The EPBD requires renovation of the 16% worst performing assets to be renovated by 2030 and the worst 26% by 2033. Member states will impose country specific legislation, and we will know more by the end of 2025 when we expect to see the same rental premium evidence emerge for assets with high EPC ratings across Europe.

The extent of the ‘green premium’ within real estate is a debate that rumbles on, with few brave enough to quantify it. However, as the 

 aims to limit global warming to 1.5°, time is running out. Legislation within the UK and EU represents this urgency and assets are at risk of stranding – sustainability considerations have become a necessity. 

Not only does a greener building potentially present a rent and yield premium maximising investor returns, but it will extend the asset life by reducing stranding and compliance risk, therefore futureproofing the investment.

Six top tips to futureproof your Industrial and Logistics assets

Simon Glenn and Matt Smith are joint heads of DTRE’s Science and Technology team.
The UK is in a global race to attract and retain the science and technology innovators of the future. And, despite the grand claims of some politicians, it still lags some way behind.

To become a ‘science and technology superpower’ – with cutting-edge sectors capable of driving the country’s economic future – much more needs to be done to ensure we are building an environment that breeds confidence for investors and in which businesses can thrive.
One (often overlooked) piece in this puzzle is meeting the increasingly pressing demand for specialist physical spaces and the needs of the investors and developers that can provide them. Regulation and skills mean nothing without the mission critical infrastructure required to allow occupiers to do what they do best.

In a recent trip to Boston, the DTRE Science and Technology team had the opportunity to experience in-person what exactly these specialist spaces, at scale, can look like. Greater Boston is the leading science and technology hub in the US, with GEN reporting 55.9 million square feet of existing inventory.

Science and technology real estate investors and developers have played their part, committing significant capital to make the hub a reality. Now, it’s a market that has attracted some of the
biggest names in pharmaceuticals and – according to the Biotechnology Innovation Organisation – added $2.9 trillion and 2.1 million jobs to the US economy in 2021.

The UK’s Golden Triangle is home to world-leading academic institutions and some of the biggest players in the most innovative sectors. There is no reason that the region cannot be a similarly
powerful driver of growth for the UK. But it’s no simple fix, and no easy market.

The needs of today’s most innovative occupiers are far more advanced than those of before. Their technical requirements are varied and uniquely stringent from one business to the next. These are developers facing high regulatory hurdles, above and beyond those already posed by the UK’s labyrinthine planning regime, and investors struggling through a cautious macroeconomic environment. They need to know that their money is going where it matters most.

And it’s about more than just life sciences. Much has been made of the UK’s potential to lead the way in this important niche, but there is a much wider group of cutting-edge occupiers that are worthy of attention (and investment) too, such as those focused on AI, robotics, or nanotech, to
name just a few. These are businesses with no need for petri dishes but that still have their own very unique set of infrastructure requirements.

With demand for specialist spaces in the UK reaching new heights, these obstacles threaten to pinch the – still growing but so-far largely undelivered – pipeline of suitable sites. Expertise, guile and gnarly experience are required to smooth the process, speed up delivery and house the innovators of today and tomorrow. Expert real estate advice is needed, now more than ever, to meet the UK’s science and technology opportunity.

With more than 60 years’ of combined science and technology expertise and first-hand developer experience, DTRE is a science and technology specialist. We harness best-in-class market intelligence, research and data, meaning we know what businesses – from occupiers and operators, to developers and investors – need to operate at their best.

To get ahead, businesses need to be tapped into the breadth and complexity of the UK’s science and technology property market – with an overview of the trends that are driving it and the detail that sits beneath the headlines.

The UK remains a place with enormous science and technology potential. Having ourselves advised on over £1 billion in development transactions, and with DTRE currently instructed on leasing over 3 million square feet, we are experienced advisors in a nascent market: enabling our clients to build their future here and deliver on the UK’s technological ambitions.

Delivering Spaces Fit For Britain’s Future

At a quick glance, the storied City of London - the nation’s financial hub - has little in common with the UK’s life sciences sector. It’s suits, not lab coats.


But, can many of the same characteristics that make the City the country’s financial engine room also power something special in life sciences?


The UK Government describes the life sciences sector as among the most valuable and strategically important to our economy, as well as being critical to the country’s health, wealth, and resilience (Life Sciences Vision 2021).


With its reputation as one of the historic birthplaces of commerce and trade, the City has been making significant strides in diversifying its economy and nurturing a thriving innovation ecosystem.

 The City’s established position as a global financial hub provides a solid foundation for innovation. Its high concentration of financial institutions, venture capital firms, and angel investors have fuelled the growth of start-ups and scale-ups in the life science sector across the UK.

 The City’s excellent infrastructure, including high-speed internet connectivity and resilient power network, is essential for start-up bio-technology companies, providing them with the mission-critical elements to conduct their research and race towards the next milestone. Its central location and robust transport infrastructure make it easily accessible for talent, investors, and partners from across the capital and beyond. 

Both the City of London Corporation and the UK Government have recognized the potential of the City becoming a global innovation cluster. Initiatives such as the Future City Initiative and the FinTech Strategy, along with funding programs and tax incentives, demonstrate the commitment to fostering innovation and attracting investment. These efforts enhance the City’s competitiveness and attractiveness as a destination for startups and entrepreneurs.

The City of London offers numerous opportunities for collaboration between start-ups, established businesses, and research institutions. The close proximity of major financial institutions, law firms, and consultancy firms encourages knowledge sharing, mentorship, and strategic partnerships.


A life sciences innovation cluster in waiting, but…


There is real potential for the City of London to become an innovation cluster for life sciences in the UK – much as the Golden Triangle of London, Oxford and Cambridge acts as a pre-eminent cluster in healthcare. Between the three cities, they attract foreign direct investment and drive economic growth for the UK at large, contributing over 45% of the £94.2bn turnover generated by the sector in 2021.


An innovation cluster is defined as a geographic concentration of interconnected companies, research institutions, and supporting organisations that collaborate and innovate within a particular industry or field. 


For the life science sector, innovation clusters play a crucial role in fostering knowledge exchange, and advancement in research and development. These clusters bring together various stakeholders such as pharmaceutical companies, biotechnology firms, academic institutions, teaching hospitals and venture capitalists.


The crucially missing component at present, is suitable real estate for these companies. While the technical specification of these buildings is exacting, in a market with approximately 125 million sq. ft of standing office buildings, it is inconceivable that there are not buildings that would support a conversion to laboratories.


With over one million square feet of named life science occupier demand, and availability of less than one per cent, this is an oversight and London itself should be viewed as the cluster. There is significant strength in marketing London as a cohesive cluster given its access to specialised talent pools, shared resources and infrastructure, collaboration opportunities, funding sources, and a world class transport system allowing an individual to get from Canary Wharf in the East to White City in the West in as little as 38 minutes.


As with many emerging sectors, fortune has favoured the brave, and those that move quickly stand to benefit from the current supply demand imbalance. By embracing emerging technologies and diversifying its economic base, the city can drive forward breakthroughs in life sciences, biotechnology and related sectors, contributing to London’s position as a global innovation hub.


The City of London’s journey from a financial powerhouse to an innovation powerhouse is underway, and the stage is set for its emergence as a thriving and dynamic life sciences cluster in the heart of the Capital.

A Shot In The Arm For The City? Life Sciences & London

Over the past six months, you may have heard various adaptations of the phrases ‘sticky market’, ‘re-adjustment’, ‘the new normal’ or ‘protracted decision making’ when discussing the current state of the industrial and logistics market. However, you will also have heard that ‘rental growth
is still robust’, ‘supply is still tight’ and that there is a ‘flight to new-build quality product’.

Whatever your stance on the current market dynamics, all of us are aware that there has been a significant shift since its peak in Q2 2022. Take up has cooled, yields have softened, and speculative
development volumes have eased off.  However, we have to be very careful when depicting what this means for the industrial and logistics sector. 

The ‘race for space’ since March 2020 saw record volumes of take up and deals completed. Contracts were being awarded in record numbers in the 3PL market, coupled with unprecedented sales in the online retail markets. This created the perfect storm for the industrial and logistics sector, especially in the Midlands region, which saw up to 35% rental growth in those three years. My fellow Partner, Jamie Catherall, wrote a Credible Thinking piece on the effect this had once the dust had settled, with the release of up to 6.2m sq ft of grey space into the market. 

Most of that space now has identified occupiers attached to it, and in some circumstances, at significant levels of profit rent. Furthermore, aside from Wolverhampton 450 in the West Midlands,
there’s been no new announcements of grey space being released into the market so far this quarter. So where does that leave us now?

My view is that occupiers will now be looking at longer term, more strategic acquisitions for XXL (500,000 sq ft +) distribution facilities. The key drivers for this for this will be supply chain efficiencies created through consolidation of existing portfolios, the requirement for more space as a result of onshoring of operations and stockpiling. ESG credentials driven at board, shareholder and staff level will also have an ever-increasing impact coupled with the fact senior decision makers now actually have time to sit back, take stock and plan.