National Industrial
The UK industrial and logistics market remains supported by favourable occupational fundamentals despite investment activity remaining below post-pandemic peaks. Occupier demand remains robust, with Q2 2026 take-up reaching 13.2 million sq ft, supported by logistics operators, retailers, e-commerce occupiers and new market entrants. Activity in the food, defence and automotive sectors is also providing additional momentum. Market conditions are improving operationally, with transactions completing at an increasingly rapid pace as occupiers move to secure scarce Grade A accommodation. More than 8.7 million sq ft remains under offer, suggesting further reductions in available space.
A widening gap continues to emerge between prime and secondary assets. Occupiers are increasingly prioritising power availability, ESG credentials and modern specifications, supporting demand and rental growth for best-in-class stock whilst increasing obsolescence risk for older buildings. Although incentives remain elevated for secondary accommodation, prime rental growth remained resilient at 3.1% year-on-year, underpinned by constrained supply and a subdued development pipeline. Elevated construction and financing costs continue to restrict speculative development, supporting further supply-side tightening over the medium term. Regionally, the South East and London continue to benefit from demand linked to e-commerce, defence, data centres and last-mile logistics, whilst the Midlands remains one of the UK's strongest-performing markets, supported by logistics, manufacturing, automotive and defence-related occupiers.
Average industrial yields have stabilised at approximately 7.3% following two years of outward movement, whilst the sale-to-asking price differential has narrowed, signalling improved alignment between buyers and sellers. Other liquidity metrics are also improving, with time-to-sale shortening across several regions.
Headline deals / transactions in market
H1 2026 saw £2.38bn invested into UK industrial and logistics assets across 85 transactions. Whilst this remained approximately 25% below both the long-term trend and H1 2025 volumes, more than £1bn of additional transactions progressed into legal due diligence during Q2, demonstrating continued investor appetite despite a more cautious capital markets backdrop. Q2 investment volumes reached £1.26bn across 36 transactions, representing a 13% increase on Q1, with larger lot sizes accounting for an increasing proportion of activity.
Distribution assets continued to attract significant investor interest, particularly well-let institutional-quality logistics properties with strong occupier covenants. Hines' acquisition of Bedfont Logistics Park for £140.3m at a reported 3.40% NIY provides evidence of continued competition for prime South East logistics stock. Owner-occupier activity also remained evident, including Smyths Toys' acquisition of Max Park, Corby for £118.0m, whilst ICG expanded its exposure to the sector through the acquisition of ARRI, Uxbridge.
Activity within the multi-let industrial sector remained robust. Transactions included Cathedral Hill Industrial Estate, acquired by Schroders for £39.0m, and Patchway Enterprise Park, acquired by ICG for £33.9m, demonstrating ongoing institutional demand for established industrial estates offering diversified income and rental growth potential.
Portfolio activity was a key driver of investment volumes during Q2. Notable transactions included ICG's acquisition of the Springbox Portfolio for £200.5m and EQT Exeter's acquisition of the Tritax Portfolio for £199.0m. More recently, BGO completed the sale of four of seven UK logistics assets from its Tudor Portfolio to Sunrise Real Estate and Aermont Capital for approximately £150m. The transaction formed part of the wider £300m portfolio acquired by BGO from Morgan Stanley Real Estate and demonstrates continuing liquidity for institutional-grade logistics stock. These transactions highlight investors' willingness to transact at scale where portfolio quality, income security and rental growth prospects align. Pricing varied materially according to asset quality, income profile and growth potential, with investors increasingly focused on opportunities offering clear routes to income growth and value creation.
Who is buying?
Institutional investors remain a significant source of demand, particularly for larger lot sizes and assets capable of delivering long-term income growth and operational resilience. Investment activity has become increasingly concentrated, with a smaller number of larger transactions accounting for a greater proportion of overall market volume. Investor demand remains strongest for prime logistics assets, institutional-quality distribution stock and multi-let industrial estates offering secure income and identifiable rental growth opportunities.
Buyer behaviour is becoming increasingly selective. Whilst significant capital remains available, investors are placing greater emphasis on asset quality, income security, ESG credentials and opportunities for future value creation. Demand remains strongest for modern, well-specified accommodation benefiting from favourable occupational fundamentals, whilst assets with clear asset management and rental growth potential continue to attract competitive bidding.
Who is selling?
Institutional vendors remained active during Q2, bringing several sizeable opportunities to market and generally achieving strong levels of buyer engagement. Portfolio disposals accounted for a significant proportion of activity, reflecting continued investor appetite for opportunities that allow capital to be deployed at scale. This remains a preferred route for buyers such as ICG and EQT. In Q2 2026, ICG acquired the Springbox portfolio of five distribution hubs from Equites Property Fund for £200.5m, reflecting a 5.5% yield. Earlier in the year, EQT acquired Project Dawn, a portfolio of three Midlands logistics warehouses, from Prologis for £130.3m, reflecting a 5.6% yield. These transactions demonstrate that vendors can continue to recycle capital efficiently through well-let, institutional-quality portfolios where liquidity remains strongest.
At the same time, the increasing divergence between prime and secondary industrial stock is influencing disposal strategies. Owners of older accommodation face growing obsolescence risk, rising capital expenditure requirements and increasing occupier focus on ESG compliance and power availability. Consequently, investor demand and pricing have become increasingly dependent upon asset quality, specification and future leasing prospects.
Direction of Travel
The outlook for the industrial and logistics sector remains positive, supported by healthy occupier demand, constrained supply and limited speculative development. Availability is expected to reduce further as existing Grade A stock is absorbed and development activity remains restricted by elevated construction and financing costs. As a result, prime industrial and logistics assets across the South East, Midlands and North West are expected to continue outperforming.
Investment volumes reached £3.7bn during Q4 2025, although activity moderated during early 2026 amid global uncertainty. Recovery is anticipated and the sector is forecast to deliver annual returns of approximately 8.4% through to 2028. Whilst pricing uncertainty and geopolitical risks are likely to constrain activity in the near term, in the medium term improving liquidity, stronger occupational market fundamentals and continued institutional participation should support gradual recovery in transaction volumes. Off-market transactions are expected to remain prevalent, particularly for larger lot sizes and prime stock.
The principal risks remain interest rates, economic growth, inflation and geopolitical uncertainty. Nevertheless, constrained supply, favourable occupier market dynamics and longer-term structural demand drivers should continue to underpin the sector, with modern, well-located accommodation expected to outperform older secondary stock.
