UK Industrial & Logistics: Breaking the South East focus

Jack Franklin

Amazon’s recent £40bn commitment to UK infrastructure and a number of recent large logistics leasings reflect confidence in long-term demand and the UK occupational market is strong.

While London and the South East provide convincing opportunities, smart capital is looking beyond the M25 in regional powerhouses that offer compelling growth prospects and resilient returns. This shift is good for investors and has the potential to rebalance economic activity and stimulate more inclusive growth across the UK.

Last year, I&L accounted for over a third of all UK commercial property investment, according to Lambert Smith Hampton, with the highest total returns of any major asset class. In an environment where capital flows are becoming ever more selective across asset types, this stands as a testament to the robust fundamentals of the sector.

Against this backdrop, smart investor capital seeking yield and strong risk-adjusted returns is finding I&L opportunities throughout the regions.

The Midlands’ ‘golden triangle’ area bounded by the M1, M6 and M42 is a prime example. Centrally located, with 90% of the UK population within four hours, it is an essential epicentre of UK distribution networks. Occupiers in parcel delivery, ecommerce and food logistics are entrenched in the region, supporting consistent absorption and low vacancies. Crucially, the area also has planning frameworks that support development, improving investor outcomes.

Industrial strength: Amazon recently announced it was committing £40bn to UK infrastructure

The North West and Yorkshire have seen multi-billion-pound logistics deals in the past year, with institutions backing speculative and build-to-suit schemes in areas with a supply-demand imbalance. These markets enjoy robust local labour pools, excellent transport links and policy support through Local Enterprise Partnerships and the Growth Hub initiative, creating a compelling thesis for regional investment.

Regional occupier demand for big-box units over 100,000 sq ft is strong, with a number of big Q2 lettings. In this size bracket, occupier requirements become more national, with the ability to choose from different regional hubs. The flight to quality is accelerating, with occupiers focused on best-in-class, energy-efficient, flexible and ESG-compliant space. Regional schemes with fewer legacy constraints and larger footprints are well positioned to meet these demands without the cost or compromise of urban infill sites around London.

The regional I&L outlook remains bright. With interest rate cuts anticipated and rental growth showing resilience, repricing is complete and further yield compression plausible in some submarkets. Structural tailwinds including ecommerce, supply chain reconfiguration and decarbonisation are spurring long-term demand.

While London remains attractive, particularly for last-mile logistics and multi-let urban schemes, investors building balanced, future-proofed portfolios could benefit from widening their view. By tapping into markets like the Midlands, the North West and Yorkshire, they can diversify, harness demographic and infrastructure advantages and attract high-quality tenants.

Jack Franklin, UK capital markets director, Panattoni