5 Things You Need to Know About Big Box Logistics in Q1 2025
- Q1 ’25 saw just over 6.3 m sq ft across twenty-seven (27) transactions – in-line with post-Covid quarterly average.
- There are currently thirty (30) Big Box units currently under offer, totalling 9.4m sq ft.
- The DTRE Big Box Vacancy Rate has risen over the last 3 months to 7.3% from 7.2%.
- Across both single and multi-let, £1.1bn traded in Q1, down 43% on the average quarterly deal volume witnessed in 2024.
- Sentiment in the sector had improved markedly, however, Trump Tariffs will continue to act as a handbrake for some, potentially reducing the list of potential purchasers.
Occupational Market
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.
Capital Markets
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.
