5 Things You Need to Know About Big Box Logistics in Q2 2025
- Q2’25 saw just over 6.3 m sq ft across twenty-seven (27) transactions – taking the half-year total to 13.1m sq ft, 7% ahead of pre-Covid H1 average (2007-19).
- There are currently forty-four (44) Big Box units currently under offer, totalling 13.2m sq ft.
- The DTRE Big Box Vacancy Rate has risen over the last 3 months to 7.4% from 7.3%.
- 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.
- Moving through the remaining six months of the year factors outside of real estate fundamentals will continue to influence the capital markets.
Occupational Market
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.
Capital Markets
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.
