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Key Market Indicators You Need To Know in Q3 2025

From this quarter, we’re benchmarking the UK against key global peers. The new feature will highlight take-up, vacancy and investment trends worldwide, showing how the UK compares and where opportunities are emerging. As capital and occupier demand shifts and refocuses globally, this perspective will give sharper insight into the UK’s position in the international market.

The Big Box market belied the perceived macroeconomic doom and gloom in Q3, with take-up rallying to its second-highest quarterly total in the past two years. There was 8.3 million sq ft transacted across 31 separate deals in the quarter, which is 11% ahead of the quarterly average seen since the end of 2022. This pushes year-to-date activity to nearly 22 million sq ft, sitting 9% above the same period last year and 7.5% ahead of the pre-Covid 10-year average (Q1–Q3).

Retailers remained the dominant occupier group, continuing to optimise supply chains and promote network efficiencies. However, manufacturers also made a strong return, taking their largest share of space since 2022,
a signal that domestic consumption and production as well as supply chain consolidation remain key themes. 

Indurent’s letting of its Omega 420 scheme in Warrington to Regency Glass was the standout manufacturing deal of the quarter, but on the whole there were 11 separate deals to manufacturers of various types, and that’s the second-best quarter in the last 5 years. The 1.3m sq ft pre-let by M&S at Prologis’ DIRFT was the biggest deal of the quarter, as well as the year, to date.

Geographically, the Midlands reaffirmed its status as the UK’s logistics heartland, accounting for nearly half of all take-up by volume (47%) and 13 of the 31 deals recorded. The South East and London saw renewed momentum with 6 deals, it’s best quarter since Q2’22 and capped by the InPost deal in London, the first Big Box transaction over 100,000 sq ft in the capital since late 2023. 


Interestingly Q3 also saw the return of the ‘XXL shed’. There were 8 separate lettings of 300,000 sq ft plus in Q3, that’s more than in any other quarter in the last 3 years and as a result there’s now just 15 new/spec built units available between 300-400,000 sq ft in the UK, that’s a fall of 35% this year and there are currently zero units of this size under construction now Logicor’s Bolt 330 in Manchester has reached completion.

In terms of the overall supply and vacancy picture, the DTRE Big Box Vacancy Rate has remained flat over the last three months at 7.4% and there is currently 60.3 million sq ft of vacant units across the UK, with the Midlands accounting for 41% of that total. The majority of the currently available supply (64%) is second-hand with 21.9 m sq ft of vacant ‘new spec built’ units on the market, which is a fall of close to 3% over the quarter. 

Fig 2. Speculative Development Outlook is Subdued


There’s now just shy of 6m sq ft of new/spec built product due to p/c over the next 12 months, with the four quarter rolling total averaging c.10.9 million sq ft over the last 10 years, this demonstrates a considerable slowdown in the Big Box development market. Given the relatively meagre amount of new supply coming on-stream then we expect to see a move down in the vacancy rate by the end of this year and into 2026.

Whilst the macro-economic backdrop, and later than anticipated budget could eat into business sentiment in Q4, there is an expectation of continued occupier activity in the Big Box market, particularly given the c.10million sq ft of deals currently under offer. Combine this with the number of large requirements circulating from retailers and defence manufacturers in-particular and a limited development pipeline, the market is well-positioned for a strong finish to the year.

Again despite the macro noise, the UK logistics investment market held firm in Q3, with £1.75 billion transacted, broadly in line with the three-year quarterly average. In a continuation of what we’ve seen over the last six to nine months, activity was underpinned by deals at either end of the pricing barbell, with continued appetite for big ticket ‘Big Box’ portfolios and whole logistics parks of c.£80m plus, as well as smaller ‘value-add’ deals that provide opportunity to bolt-on assets to existing aggregation strategies and drive returns through active asset management.

The standout transaction of Q3 was Blackstone’s £489 million take-private of Warehouse REIT, reaffirming their confidence in the long-term fundamentals of the sector. On the single-asset front, Pontegadea’s purchase of an Amazon facility just outside of Liverpool for £80m/5.00% marked the largest individual deal of the quarter.


Fig 3. Rolling 4 Quarter Investment Volumes

Yields held steady through the quarter from a valuation perspective (4.82% distribution warehouse NIY from MSCI in July to 4.84% NIY in Aug), however, there remains a disconnect between vendors and purchasers when it comes to actual deals, with vendors unable or unwilling to sell at below valuation and purchasers unwilling to be seen to be paying ahead of the perceived ‘market’ rate. With seemingly plenty of liquidity in the debt markets for logistics assets this has resulted in some portfolios being re-financed, rather than sold in the last quarter.

Looking ahead, the remainder of 2025 is likely to be shaped by macroeconomic headlines — particularly around the UK’s Budget in late November, any resulting gilt market sensitivity and the resultant knock-on effect to further rate cuts.

Yet positively, there remains significant capital waiting to access the sector. As has been the case for the last 18 months or so, the challenge lies not in demand or weight of money targeting the sector, but in bridging the gap between vendor and purchaser aspirations. However, with the anticipation of more ‘core’ capital entering the market from 2026, particularly given the re–organisation of the Local Government Pension Schemes (LGPS), we think that gap could be bridged before too long.


Fig 4. UK Prime Logistics & Bond Yields vs European Peers

DTRE Big Box Logistics
Report - Q3 2025

DTRE Big Box Logistics Report - Q3 2025

It’s fair to say this summer has been anything but quiet for the UK ‘big box’ logistics market, with leasing activity showing signs of turning a corner after the frustrations of the past 18 months. Total take up in the 100,000 sq. ft + market stood at 18.86 million sq ft, as of the end of August, which is 3.5% up on the same period last year, and 6.3% ahead of the 10-year pre-Covid average.

The Midlands continues to outperform the other regions, reaffirming its position as the UK’s most sought after location for logistics and manufacturing businesses. Take up across the East and West Midlands is currently at 7.6 million sq. ft, with a further 4.1 million sq ft under offer. With very little new speculative development being announced across the region, we are seeing rental growth across all the core locations. Core schemes such as Magna Park Lutterworth, SEGRO Park Coventry Gateway and DIRFT, are now all firmly established in the £10s per sq ft, with the next wave of speculative development expected to push into the £11s across these logistics’ parks.


So, what’s behind the sudden spike in leasing volumes? It can be one of, or a combination of several factors; Trump’s tariffs across the globe making the UK an attractive place to store and distribute stock, building obsolescence and a dwindling supply of good quality, energy efficient buildings, supply chain efficiencies through consolidation and automation, increased defence spending and therefore a surge in military backed contracts, and a more buoyant automotive sector.

Who is taking the space? It’s no secret that Chinese businesses have been very acquisitive so far this year. 

JD Logistics have leased nearly 930,000 sq ft across sites in Milton Keynes, Dunstable and Coventry, with more live acquisitions in the pipeline as they aim to take on the likes of Amazon for UK market share. The market is poised for the next wave of acquisitions from Super Smart Services, having acquired close to 1m sq ft in 2024. Meanwhile, Top Cloud Logistics has entered the UK market with its acquisition of 160,000 sq ft in Birmingham. 

Midlands Take-up by Sector (to end Aug 2025)

Perhaps unsurprisingly, we have seen an uptick in enquiries from defence related companies, with the likes of Babcock, Marshall Aerospace and BAE all having either already acquired warehouse space already this year, or under offer on their preferred buildings. With defence budgets on the rise, this is a trend we expect will continue for several years. 

Alongside the growth in defence-related activity, the 3PLs have remained central to activity, with DP World, Menzies, GXO, Iron Mountain, Fiege and DFDS having a busy year so far. Finally, the supermarkets have been the strongest performing retailer group, with M&S (1.3m sq ft), Tesco (806,000 sq ft) and Sainsbury’s (391,000 sq ft) to name just a few examples.


All-in-all, market sentiment has strengthened considerably this year, particularly for the Midlands big box market. With the busiest period still ahead of us, let’s hope this continues in to the year end, and beyond.

Midlands
Market Opinion

Midlands Market Opinion

5 Things You Need to Know About Big Box Logistics in Q2 2025

Data to suit any narrative is very much the theme of the UK’s Big Box logistics market at the moment. The first six months of 2025 have been positive from a demand perspective, with take-up volumes in excess of pre-Covid averages at 13.1m sq ft and a significant number of deals ‘under offer’. On the flip-side, the vacancy rate has crept higher to 7.4% from 7.2% at the turn of the year and there are now c.59m sq ft of vacant units dotted across the UK, however, the vast majority of these are second-hand.

Take-up of ‘Big Boxes’ (units of 100,000 sq ft plus) has reached 13.1m sq ft at the end of H1, ahead of the long run pre-covid average (2007-19) for the half year (12.33m). Indeed, in the month of May we saw 3.2m sq ft of take-up of ‘standing stock’ (i.e. excluding pre-lets/Design & build), which represents the best month for take-up of up and built units in over three years. 

In addition, there are currently forty-four (44) Big Box units currently under offer, totalling 13.2m sq ft. If all of those units were to complete in the next six months then take-up by the year end will reach c.26 million sq ft, 7% ahead of the pre-Covid annual average.

Furthermore, we remain unaware of any recent deals that have stalled due to the introduction of tariffs by the US. Indeed, there are examples, particularly of Chinese e-commerce and 3PLs taking space in the UK in anticipation of tariff disruption, which has aided take-up numbers.

One area of demand that has fallen away this year is for pre-lets and design and build units. DTRE have only recorded 1.9m sq ft of design and build transactions so far this year. That’s down significantly on the 4.4m sq ft we witnessed by the same point in 2024 and the lowest volume of design and build deals since 2011. The biggest deals have been for standing stock (GXO taking Panattoni’s Avonmouth 885 scheme and ID Logistics acquiring Sherburn550) and encouragingly we witnessed 19 deals for units between 100-200,000 sq ft in Q2, that’s 26% up on the pre-Covid long-run average and demonstrates a depth and confidence to the SME’s underpinning the sector.

In terms of supply and vacancy, the DTRE Big Box Vacancy Rate has risen slightly over the last 6 months to 7.4% today from 7.2% at the end of Q4’24.  There is currently 58.9 million sq ft of vacant units across the UK, with the Midlands accounting for 41% of that total. The majority of the currently available supply (62%) is second-hand with 22.4 m sq ft of vacant ‘new spec built’ units on the market also. However, with only 4.2 million sq ft of additional ‘New/Spec-built’ units coming online this year, we continue to predict falling supply by Q4 ’25, even at average levels of occupier demand.

Despite the rising supply, rental growth is still being witnessed, albeit certain markets are now moving at different speeds. Rental growth data from MSCI suggests that you continue to see rental growth as long as the vacancy rate remains below 10% (see Fig 2). Therefore, despite the current level of vacancy, annualised rental growth for distribution warehouses in the year to end May was 4.6%, still well ahead of offices (2.2%) and retail (1.9%) and with the vacancy rate forecasted to start to fall by Q4, we expect rental growth to remain robust, particularly for prime.

Moving through the final six months of 2025, whilst the tailwinds of e-commerce have faded from what they were they remain structurally high and a key driver to the sector. When allied with the restructuring of supply chains by the UK’s leading grocery retailers, as well as the reshoring, near-shoring and friend-shoring phenomenon that is taking place in retail (and to a lesser extent manufacturing) and the additional defence spending announced by the government, this all points towards robust levels of occupier demand in the short, medium and longer term.

In similar vein to the leasing market, you can find data to suit any narrative within the capital markets, as we tick past the half year. Across the entire industrial and logistics landscape for both single and multi-lets just over £2.2bn has traded in Q2, taking the H1 total to £3.3bn, and 17% ahead of the quarterly average seen since the Truss/Kwarteng Budget of Q3’22. In a reversal of recent times, big ticket ‘Big Box’ portfolios and logistics parks of c.£100m plus have driven the market, as the ability to aggregate and drive returns through active asset management have become the preferred strategies for investors.

On the flipside, a lack of forced sellers, the dialling back of rental growth assumptions and a lack of willingness to underpin exit yields at anything below 5%, means the single and multi-let markets between c.£20-50m remain relatively hamstrung, with vendor and purchaser aspirations relatively far apart. The result being that deal-making has moved to either end of the barbell. Portfolios and single-ownership logistics parks suitable for aggregation and asset management strategies, and smaller lot sizes with lower risk and access to reversion, seeing the most activity in Q2 and we expect this to continue in Q3 and Q4.

The biggest deal in the quarter saw LondonMetric acquire Urban Logistics REIT for £699m, which accounted for 28% of the total volume traded in Q2. A number of other portfolios also traded, with Barings acquiring the Access portfolio from Blackstone for £145.5m and Greykite purchasing the Aurora portfolio from Logicor for £245m. Whilst in the listed space the battle for Warehouse REIT at c.£490m shows the eagerness of investors, namely Tritax and Blackstone in this case, to take advantage of the perceived discount. In terms of single-let assets trading, LondonMetric have forward funded a new M&S warehouse in Bristol to the tune of £74m/5.7% but outside of that relatively little has transacted.

Moving through the remaining six months of the year factors outside of real estate fundamentals will continue to influence the capital markets. Downside risks to deal volume and pricing come most notably from Rachel Reeves and her fiscal rules, which will be exposed in her Autumn Budget and will come at the end of October/start of November.  Investors have become increasingly sensitive to UK fiscal policy and if Labour are unable to convince the bond market that they can balance the books, then bond investors will demand higher yields to compensate for the perceived fiscal risk. The result being UK gilt yields would move out, at or just above 5%, with a subsequent knock-on effect to property pricing.

Alternatively, there are also several factors that should be exerting downward pressure on UK bond yields, should fiscal worries be allayed – including falling inflation in the US and UK by Q4, and further rate cuts by the Federal Reserve and the Bank of England. If the Bank of England can cut interest rates a further two times this year, as the market expects, then this will help reduce borrowing costs and 5-year swaps should move closer to 3.5%, if not dip below, potentially helping bridge the purchaser/vendor mismatch.

However, if the BoE cut any further than two more times, that would signal an underlying weakness to the UK economy that would present different challenges, even if financing rates became more accretive to deals. 



DTRE Big Box Logistics
Report - Q2 2025

DTRE Big Box Logistics Report - Q2 2025

5 Things You Need to Know About Big Box Logistics in Q1 2025

The Big Box occupational market has started the year on a stable footing, with quarterly take-up largely consistent since the beginning of the ‘post-Covid’ era (Q1 ’23). Q1 ’25 saw just over 6.3 m sq ft across twenty-seven (27) transactions. There are currently thirty (30) Big Box units currently under offer, totalling 9.4 m sq ft. Q2 should still see take-up in-line, if not above the ‘post-Covid’ quarterly average of 6.7 m sq ft if, as the domestically-focused nature of the majority of the space under offer is unlikely to be affected by ‘Trump’s Tariffs’. The knock-on effect of Trump’s tariff policy, and the business uncertainty created by it, is more likely to be seen in Q3’s numbers, and beyond, if left un-resolved.

Breaking down the data further, 63% of transactions were from the 100-200,000 size-band of supply, which is consistent with the long-term average of 59%. Encouragingly, the 300-400,000 sq ft range, saw 5 lettings, its most active quarter of the last 3 years. For context, this is equivalent to 55% of 2024’s annual total for the same size-band.

The 3PL’s remained the most active business sector and accounted for 52% of all the space let in the quarter, with nine separate deals totalling 3.3m sq ft. The much talked about manufacturing ‘boom’ is yet to materialise, at least in the Big Box market. There were 8 separate deals to manufacturers in Q1, marginally ahead of the 7 deals manufacturers have averaged in each quarter of the last 10 years. 

DTRE expects defence and aerospace players to be active players in the remainder of the year with the UK and EU’s increased defence spending likely to result in additional manufacturing and storage space being required and these types of businesses are increasingly appearing on requirement schedules.

Whilst it’s too early to call the winners and losers of Trump’s tariffs policy, the on-shoring, near-shoring and friend-shoring trends that emerged post-Covid, when supply chains were significantly disrupted, could become increasingly prevalent. The UK’s eagerness to do a trade deal with Trump’s team could attract businesses unable to locate in the US but still keen to avoid the worst of the tariff charges being levied on other countries. However, this hypothesis still has a way to play out, yet.

What has become more obvious is that the US’s removal of its duty-free de-minimis rule for goods from China and Hong Kong from the 2nd May will see retailers taking advantage of the UK’s de-minimis rule to sell stock previously bound for the US. A potential knock-on effect being additional warehousing requirements from 3PLs associated with Shein and Temu, in-particular.

Geographically there has been a wide variance in regions performing above and below their usual averages. We’ll await to see how this plays out in the remainder of the year but when looking at Greater London in-particular, there is now reasonable evidence to suggest that there has been a fundamental shift in the occupier base and affordability concerns have paralysed leasing deals of 100,000 sq ft plus.  In London, there has not been a deal of 100,000 sq ft plus in over 18 months, despite 15 vacant units currently on the market in the capital.

Elsewhere, however, 2025 has started positively. Yorkshire has recorded 9 deals in Q1, totalling 1.85 million sq ft. That’s Yorkshire’s best quarter ever in terms of number of deals, eclipsing the 8 deals it recorded in Q2 2020 and the 7 deals recorded in Q3 2010. Other regions performed much closer to historic averages, with the East Midlands remaining the dominant region in terms of deal volume, totalling 2.44 million sq ft (39% of total UK volume).

The DTRE Big Box Vacancy Rate has risen slightly over the last 3 months to 7.3% from 7.2% at the end of Q4’24. New, large, spec built, additions to the supply schedule include Logicor’s Derby 507 (507,503 sq ft) and S440 Panattoni Park Sittingbourne (439,228 sq ft) and there is now 21.33 million sq ft of ‘New/Speculatively-Built’ units on the market and a further 37.58 million sq ft of ‘Second-Hand’ units, with supply totalling 58.9 million sq ft. However, with only 8.2 million sq ft of additional ‘New/Spec-built’ units coming online this year, we predict falling supply by Q4 ’25, even at average levels of occupier demand.

Rental growth has remained positive through Q1 with 1.1% growth for industrial, according to MSCI (0.5% retail; 0.8% office), and some regions have seen new headline rents set. In the South West, C110 Indurent Park let at £10.50 per sq ft and IMI Thompson Valves took a pre-let at £12.50 per sq ft on 100,316 sq ft in Poole. In the North West, Sterling Group agreed a sub-lease of Unit 4, Icon at Manchester Airport from THG at £10.50 per sq ft, whilst frozen food grocer Iceland agreed to pay £8.75 per sq ft on 367,000 sq ft at Ergo Park Oldham, a 13% premium to the original quoting rent when the building reached practical completion in late 2022.

DTRE continue to forecast above inflation rental growth for the remainder of this year at 3.7% for Big Boxes, with double-digit rents for prime/Grade A units firmly established in the core regions of the Midlands and North West by the end of 2025. Albeit in some pockets of the UK incentive packages have moved out, particularly where landlords are in competition to secure tenants.

There certainly has been an improvement in investor sentiment at the start of 2025 and whilst that has yet to translate into any meaningful deal volume, with just three single-let deals of £30m plus in the quarter, from this point on DTRE anticipates volumes and deal flow to pick-up meaningfully, despite ‘Trump’s Tariffs’. The fundamentals of UK logistics real estate are not changed by ‘Trump’s Tariffs’, whilst sentiment could likely be damaged in the very short-term, the cyclical nature of real estate and the increasing likelihood of additional rate cuts by the Bank of England means the UK’s logistics real estate could well be one of the best spots for global capital to put its money to work.

Across the entire industrial and logistics landscape for both single and multi-let, only £1.1bn traded in Q1, down 43% on the average quarterly deal volume witnessed in 2024. The biggest deal saw Indurent purchase the Langtree & PGIM Portfolio for in the region of £200m. The biggest single-let deals saw Valor complete the purchase of a 627,000 sq ft Tesco unit in Thurrock for £127.7m. 

Other significant deals of the last three-months saw Tritax Big Box REIT purchase a 626,000 sq ft Sainsbury’s in Haydock, Merseyside from Mutual Finance for £74.25m/5.76% with a WAULT of 8-years and new-entrant Europi Property Group purchase a 243,000 sq ft unit at Port One logistics park in Ipswich which is let to Hampshire Freight Services for 15-years.


Other smaller deals to note include Tritax, through their TaSC fund acquiring a single-let Ocado unit in Leyton, Walthamstow, London from LondonMetric for £15m/4.72% and Crossbay purchasing a 64,000 sq ft unit let to Restore Datashred for a further 3 years on Optima Park, Dartford for £13.53m/5.5%.

Despite the lack of deal volume, sentiment in the sector has improved markedly from where it was twelve to eighteen-months ago. As a result, DTRE expects liquidity and volumes to pick up over the next couple of quarters with a number of large ‘Big Box’ portfolios and single-let assets expected to be brought to market. However, the geopolitical noise and now the ‘Trump Tariffs’ will continue to act as a handbrake for some, potentially reducing the list of potential purchasers.

Nonetheless, within ‘the noise’ lies the opportunity. Whilst we don’t expect pricing to meaningfully change over the next quarter or two, by autumn the world could look very different and those long-term investors who are able to ‘cut through the noise’ could well have picked up a number of assets that will quickly begin to look relatively good value.

DTRE Big Box Logistics
Report - Q1 2025

DTRE Big Box Logistics Report - Q1 2025

Cut through the noise. At the moment there’s a plethora of topics that all have the ability to drive uncertainty through real estate markets. Whether it’s Trump’s tariffs, spiking gilt yields or National Insurance  contributions, the headlines can make for difficult reading. However, from a real estate perspective, 2025 is shaping up to be a positive year with investors on the front foot looking to capitalise on re-priced assets as the next cycle begins.

With inflation stabilising, DTRE expects the Bank of England to cut rates by 100 bps this year, leaving the Bank Rate at 3.75% by the end of 2025, and these interest rate cuts will provide further liquidity across real estate with pricing and valuations supported by the reduced cost of debt.

 From an occupational perspective, the post-Budget souring of sentiment and resultant downturn in consumer and PMI surveys is expected to be more of a soft-patch rather than a sustained slowdown. As a result, DTRE expects occupier demand to rebound across all the traditional real estate asset classes with rents supported by the supply and demand dynamics that have been further exacerbated in recent times due to rising construction and financing costs.

The logistics sector enjoyed a strong finish to 2024 across both the occupational and capital markets, and despite macro headwinds that momentum has carried on into the early weeks of 2025. In the occupier markets, 2024 was a strong year with take-up of Big Box units (100,000 sq ft) totalling 28.6m sq ft – 13% up on 2023’s total. That total was reached largely without any help from large e-commerce players, demonstrating the market’s depth beyond Amazon and pure-play online retailers.

Third-party logistics providers, grocers and physical retailers were active throughout 2024. While Amazon will be active once more in 2025 with several requirements in the market, we expect the big supermarkets, defence and aerospace-led contracts, and selective high-end manufacturers to be the major drivers of take-up this year.

In the capital markets, 2024 saw £8bn of industrial and logistics assets transact, but that total was reached primarily in the absence of any large pure-logistics portfolios to boost volumes. This year, we expect to see a continuation of the same themes, with investors targeting logistics and urban/multi-let assets with reversion potential. However, as we move through the year and debt becomes more accretive and supportive to valuations, we expect to see some larger portfolios trade.

We’re seeing confidence return to the science and technology market following the second-best year for fundraising on record. Many companies have already resumed their searches for space and started to make new commitments, with a particular surge in demand for larger requirements. We expect this positive momentum in the leasing market to continue through 2025, and drive capital markets activity, too.

Rumours have also begun to swirl around growing private equity interest in UK pharma and pharma services, with several players said to be deep into due diligence. Our expectations are high that these private equity speculations will materialise, providing a further boost to one of the country’s fastest-growing industries.

And finally, while Reeves’ plans for the Oxford- Cambridge Arc are a positive signal from government and should boost market confidence, similar commitments have been made before, in 2017 – so we won’t be holding our breath. Meeting the required commercial and residential capacity in the Arc will be impossible if the existing planning constraints remain in place.

The real test will come in the Planning and Infrastructure Bill. To make meaningful inroads, Reeves will need to extend her ‘coalition of builders’ to local councillors and communities. However, if she is successful in her endeavours, it could require delivery of in excess of 80m sq. ft. of commercial workspace.

With investment in UK living totalling £14bn in 2024 – c.5% up on 2023 – private equity firms and pension funds are increasingly allocating capital to single-family housing, favouring them for their ease of construction and appeal to stable, long-term tenants. We believe that this sustained investment will drive a divergence in the single-family housing market, splitting into two distinct approaches.

On one side, traditional housebuilders will continue to focus on managing excess stock to address slowdowns in new-build sales. These housebuilders benefit from bulk sales through forward funding agreements, which provide them with liquidity and enable them to fund essential infrastructure for their developments.

The other side will feature purpose-built communities, combining multi-family housing principles with horizontal layouts, situated on brownfield land in well-connected urban hubs. With developers, contractors and funders working together in a tri-partite model, these amenity-rich developments will aim to attract renters choosing convenience and lifestyle over ownership.

Against a backdrop of NHS strikes and a national waiting list estimated at 8 million people, demand for private healthcare spaces will continue to rise with service providers looking to accommodate the rapid growth in the self-pay market and a surge in private medical insurance uptake.

For investors, the sector provides stability through long-term, often government-backed income streams. Index-linked leases and operators’ diversified revenue models – balancing self-funded and publicly funded care – enhance resilience, positioning healthcare as a lower-risk investment compared to other industries.

In 2025, we expect private healthcare to outperform other healthcare sub-sectors, fuelled by structural drivers such as the UK’s ageing population and chronic undersupply in senior living and medical office spaces. These factors will sustain demand across these critical segments, solidifying healthcare’s position as a reliable and attractive investment opportunity.

Retail is shaping up to be the ‘surprise sector’ of 2025, with rents climbing as retailers return to high streets and shopping centres. Driven by retail warehousing, we’re expecting institutional interest to reach its highest level in five years as consumer and retailer confidence strengthens.

Prime shopping centres and high street parades will still remain a focal point, while affluent suburban areas will see growth in smaller, convenience-driven retail formats to cater to localised shopping needs. We’re also expecting to see institutional investors continuing to revisit second tier shopping centres, sparking a liquidity rebound.

Experiential retail will continue to reshape the sector, with retailers leaning into immersive, in-store experiences to engage consumers. Demand for adaptable spaces will be driven by pop-ups and interactive events aiming to boost footfall and differentiate physical stores.

The contrast in leasing demand between best-in-class Grade A offices and lower-quality Grade B stock will continue, with many landlords of problem assets needing to make challenging decisions between cutting their losses, investing heavily to retrofit and refurbish, or exploring changes of use (e.g., PRS, BTR or hospitality) within the confines of planning legislation. A critical pinch point is already emerging, driven by rising development costs over the past five years, which have created a significant disparity between the demand for and supply of premium office spaces. As a result, rental growth is expected to continue, but again heavily weighted towards the sparse, premium stock.

As for capital markets, activity is likely to stay muted as long as interest rates remain high and global political uncertainty persists. While market sentiment has slightly improved, tangible signs of recovery have yet to materialise. Well-let Grade A offices in London and the Big Six should continue to offer attractive opportunities, but current owners’ reluctance to sell, due to loose yields, will likely limit transaction volumes.


That said, we anticipate some investors will focus on acquiring vacant possession buildings over the next 12 months, with plans to transform them into modern, top- tier workspaces. These upgraded assets will be well- positioned to meet occupier demand for sustainable, adaptable and high-quality office environments.

DTRE 2025 Outlook

2024 was a transformative year for sustainability.

The introduction of Biodiversity Net Gain, the launch of the first agreed methodology for net zero buildings under the UK Net Zero Carbon Buildings Standard, and the pre-release of BREEAM New Construction Version 7, slated for formal launch in Q1 2025. 

There were also significant revisions to the Energy Performance of Buildings Directive, together with potentially transformative elections in the UK, US and elsewhere.

Our full report explores the key sustainability trends that shaped industrial and logistics transactions in 2024 and offers predictions for what lies ahead in 2025. A full copy is available on request but you can find our headlines below.

Sustainability within real estate begins with addressing effective operational 

 emerges from improved asset quality, and our data analysis demonstrates a strong correlation between 

 and rent achieved. When these elements align successfully, they contribute to a favourable 

DTRE’s 5Cs of Sustainability

5 Things You Need to Know About Big Box Logistics In Q3 2024

Q3 2024 Big Box take-up has reached 18.4 million sq ft. That’s ahead of 2023 (18.2 million sq ft) but slightly behind pre-Covid averages. The traditionally slower summer market saw 5 million sq ft transact, with the biggest letting being Cain International’s Link674 in Ellesmere Port (674,000 sq ft).


After twelve successive quarters of decline in the rolling annual take-up – Q2 had seen an uptick of 5.6%, suggesting a floor to demand may have been reached. However, that uptick has since been reversed with Q3 impacted by the slower summer months and lack of bigger deals – with only one deal bigger than 500,000 sq ft and only twenty-four deals in total (on average Q3 has seen 44 deals over the last 10 years).

Activity was noticeable from the 3PL’s with EVRi taking three units in Sheffield, Avonmouth and Lutterworth with distributors generally accounting for 39% of the deal volume. The retailers accounted for the largest share of deals with retailers accounting for 44% by deal volume. Tesco at Mountpark Hinckley (491,000 sq ft) and B&M Retail at Link 674, Ellesmere Port (674,264 sq ft) the two standout deals.

A current theme ‘deal friction’ – the time taken for transactions to complete; DTRE are currently tracking close to 9 million sq ft of units that are under offer, of which over half were under offer at the end of Q2. 

In a normal cycle we would have expected these deals to have concluded and added close to 4.5 million sq ft to the total – which would put overall volumes ahead of 2023 (18.2 million sq ft) and the pre-Covid average (21.1 million sq ft).

The DTRE Big Box Vacancy rate (all units over 100,000 sq ft) has remained stationary at 6.8% through the quarter. Vacancy rates have remained unchanged overall even though new build supply is falling because tenants are ‘upscaling’ - they continue to vacate older second-hand units and occupy new and better units. New build units now represent only 35% of total supply - down from over 40% in the previous quarter.

New speculative developments; there is currently only 8.19 million sq ft under construction, of which 6 units (39% by square foot) are in units of over 400,000 sq ft and 39% are due to complete in the remaining three months of this year.

There is just 5 million sq ft of speculative developments to be delivered in the next 12 months – which without any further additions would be the lowest level of speculative completions since 2017 (4.8m sq ft). Even with significant additions 2025 looks set to be well behind the 12.6 million sq ft we’ve seen on average in each year from 2018 – 2024.


Rental growth has remained elevated, despite the effects of inflation fading, ensuring ‘real’ rental growth is being delivered to the sector. In the twelve months to August 2022 distribution warehouse rents grew 14.2% before falling to 6.3% by September 2023.

Rental growth has remained in that range for the subsequent 12 months and at the end of August ’24 annualised rental growth was 5%. However, at the same time the consumer prices index measure of inflation (CPI) has fallen from 11.1% in October 2022 to 2.2% for year to end August 2024.

There is a renewed sense of optimism that we are moving off the bottom and a new cycle is about to begin. The Bank of England’s 25bp rate cut was a positive step but was already ‘priced in’. The next cuts should provide confidence, as the pricing on 5-year swaps and 10-Year gilts move towards sub 3.5% and 3.8%, respectively. Significant dry powder continues to target the sector, and with supply set to fall in 2025, and rents likely to rise, buyers conviction should return.

Q3 saw £1.2 bn of deals complete, with the largest transaction in the sector being Prologis’ purchase of Western Avenue Business Park for £125.05 million from DTZIM, and marking their first significant deployment in over a year. The largest single asset transaction was Pontegadea’s 1st purchase of a UK logistics asset at SEGRO Park, Heathrow for £65.5m. The largest portfolio was Mirastar & KKR’s purchase of Project Tournament a collection of five single let “Big Box” assets for £115.25m. DTRE advised the purchasers on all three transactions.

The £1.2 bn transacted in Q3 has resulted in volumes reaching £4.4bn by the end of September, 8% ahead of the pre-Covid average (2010-19). Of note is that this is the first quarter of the year where volumes were not supported by large M&A activity, with five deals over £50m equating to 44% of the volume during the quarter. 

The further anticipated rate cuts should help grease the wheels of the capital markets, with 5-year swaps now trading at 3.6%, down from 4% in early June and the cost of debt on good quality logistics assets shrinking by c.120 bps since the start of Q2’24.

However, whilst Q4 will likely be busier, typically there remains a 25bps ‘bid/ask spread’ – with core investors starting to return we are seeing the return of competitive tension and the potential for that gap to start closing. Outside of the Big Box sector we have seen examples of this with reversionary mid box schemes trading in the low to mid 3’s.

DTRE Big Box Logistics Report - Q3 2024

This report provides a comprehensive analysis of the relationship between sustainability credentials, rental growth, and investment value within the industrial and logistics market. By examining data from 133 million sq. ft. of leasing transactions, conducting a solar survey with 20 companies, and engaging 125 participants across 80 firms in a sustainability survey, we uncover key insights into how sustainable practices impact asset performance. 

The findings reveal that properties with strong sustainability credentials not only attract higher rents but also deliver greater investment value and resilience in the market. This report serves as an essential guide for investors and developers, offering practical tips and insights into ways investors and developers can capitalise on the evolving landscape.

Investors are becoming sustainable investment intelligent, with 74% considering ESG in every transaction and 56% costing decarbonisation pathways during acquisitions. 

Despite no legislative pressure, the market is targeting Green+ refurbishments driven by perceived rent and yield premiums.

The rental premium between EPC A and B is widening, but there is no premium for EPC A+.

The rise of green capital is not only targeting prime assets, offering a yield improvement of 10-25 bps but also paying a premium for assets that have a clear decarbonisation strategy.

Net zero pressures have redefined the transaction process, 70% of purchasers are requesting consumption data during transaction due diligence. 

Power is the biggest challenge to the industry, 59% of developers have abandoned an acquisition due to power concerns.

Flood has been identified by 83% as the greatest physical risk but climate-related risks are not considered a priority.

The Industrial & Logistics Sustainability Handbook

Partner
Co-Head of Industrial & Logistics Leasing, Advisory & Development 

Jake Huntley

Deals are taking longer and, in this market, it means everybody is losing out. On all sides of the process, those of us involved have felt deal timelines creep up and up and up since the COVID-19  ‘race for space’ ended.

According to our research, deals are, on average, now taking almost twice as long as they did in a normalised market. Where 6-8 weeks used to be considered standard, the average big box deal today is taking around three months. DTRE is currently tracking 3.6 million sq. ft. that has been under offer for even longer than that, and our data indicates that, the longer a deal takes, the more likely it is to fall through.

In this market, transaction management is even more important, but there are other factors at play to be mindful of…

What we need is transparency and clarity. Sluggishness benefits no one, but nor does it pay to be too eager. When imprecision and carelessness creeps in during the rush to do a deal, delays and misunderstandings naturally follow.

Tenants need to be clear on when they require a facility, intend to move in and the reasons for those timings. Most Landlords will respond positively to being in possession of the facts. Of course, landlords also need to be honest and upfront with occupiers: additional scrutiny and sharing of information prior to appointing solicitors will aide with navigating the legal and due diligence processes. 

For our part, we as advisers must ensure that we have assisted in this process and carefully managed communications between landlord, tenant and consultants. At the outset of the process, establish a realistic transaction timetable, which should include legal meetings, either in person or virtually. 

Too often, speed is prioritised over accuracy, with a view that lawyers will pick up the slack. In reality, this only slows things down, and lawyers don’t come cheap.

Extra scrutiny when drafting heads of terms is crucial for minimising delays further down the line. By removing vagueness and ambiguity we can reduce the time in which legal teams are at the helm and, very generously, reduce lawyer workloads. This is a route to saving both time and money.

Careful consideration of transaction structures can bring significant timesaving benefits: accept Schedules of Condition over FRI leases or opt for an Agreement for Lease over capital contributions at your peril.

The increasing criticality of sustainability and the rise of green clauses is one legalistic element in particular where this refreshed approach would be of benefit. As a new and often unfamiliar area, widely misunderstood, it’s an element in contracts and deal processes that is time and again acting as a stumbling block.

Take solar power purchase agreements (PPAs). The complexity of such an agreement, coupled with tenants having little experience of acquiring properties with PPAs in place, is undoubtedly having an impact on the speed of transacting. Green leases, more sophisticated M&E, and a spate of contractor insolvencies are exacerbating the need for all parties to be well advised and pragmatic at this time. 

Though no two cases are the same, there is clear scope to reduce the risk of this element of a lease negotiation significantly delaying a transaction. We would all benefit from deciding on what best practice in this area looks like.

As advisers, we want and can do more. As an industry, we ourselves need to take a considered approach, identify points of difficulty, and work harder and more creatively to resolve these challenges. 

In today’s world, pairing best-match parties is a route to efficiency and effectiveness, but one made harder when information is vague or withheld. Resolving this would be a positive for all involved, and a driver of greater returns and other outcomes.

When we all draw on personal, prior experience (or consult colleagues), communicate solutions effectively, and come together to provide clarity in process and best practice, we will build more trusting and information-led dealmaking. 

All of this will help to inject some much-needed momentum. Picking a professional team capable of facilitating this has never been so important.

Industrial & Logistics Market Intelligence