Industrial real estate year in review: buoyant big-box leasing and the race for REITs

Christmas is traditionally a time of gift-giving and the industrial property sector might argue that it deserves a present or two next year after 2025 served up a host of geopolitical headwinds.

From tariffs to a tardy Budget announcement, industrial property professionals were, once again, asked to operate in a volatile market, with numerous "black swan" events knocking the stuffing out of wider investment markets globally.

But you can hear Christmas cheer across some parts of the industrial and logistics market, with developers, agents and investors highlighting the return of big-box leasing deals, with a number of standouts landing in 2025.

CoStar News speaks with industry experts to review the year and assess how the industrial and logistics sector performed across both leasing and investment. They also make predictions for the year ahead.

Grant Lonsdale, senior director of market analytics at CoStar, says the year began in "subdued fashion" for the industrial and logistics market, with US president Donald Trump's trade tariffs dominating news headlines. But he argues the UK big-box sector is now entering a phase of stability and growing in a few key areas.

While he points out that headline net absorption – the change in occupied space – remains in the red following consolidation among some retailers and third-party logistics, Lonsdale says demand for modern space is firmly positive.

"Take-up this year, while unspectacular, was supported by Chinese occupiers taking more than 2 million square feet, reflecting the diversification of supply chains and players such as JD.com looking to rival Amazon’s dominance.

"Meanwhile, the defence sector quietly increased its footprint, acquiring around 3 million square feet across the big-box and mid-box sectors, in line with rising Ministry of Defence spending."

Major deals relating to the defence sector included military technology supplier J&D Wilkes taking 211,404 square feet across the Foote & Telkes Building at Michelin Scotland Innovation Parc in Dundee.

It is also understood that Tungsten Properties and Tristan Capital’s circa 500,000-square-foot Arc 500 facility in Birkenhead went under offer to BAE Systems this year, which would be a significant deal for the North West market.

Lonsdale says vacancy appeared to peak in 2025 and is "now edging sideways". But he notes that there are still around 400 big boxes on the market across existing and under-construction stock.

"Around 45% are modern buildings, reflecting an earlier construction wave, which has now subsided. Less than 5 million square feet broke ground in the fourth quarter, a 12-year low. Securing occupiers for these newer properties will be key to reducing vacancy levels."

Looking ahead to next year and further ahead, Lonsdale says muted development appetite should help to shift existing stock delivered during and in the aftermath of the pandemic.

He says: "Encouragingly for landlords of newer warehouses, post‑2020 buildings are recording strongly positive absorption and command a 19% rent premium over 2010s stock, while older, pre‑2010 facilities continue to see occupancy losses.

"Developers, meanwhile, remain disciplined, with many favouring design‑and‑build over speculative projects. This should afford the market time to absorb the glut of speculative supply delivered over the past two to three years, restoring balance at the prime end of the market and supporting continuing rental growth."

Ed Bavister, head of UK retail, logistics and industrial research at Cushman & Wakefield, says the warehouse sector was supported by certain pockets of economic activity this year.

This is despite what he calls a "really challenging" business environment, created by resurfacing inflation and Rachel Reeves' late Budget.

Bavister says the transportation, storage and manufacturing sectors all displayed signs of recovery or growth in 2025. Increasing pressure on supply chains over the past 18 months has also aided the sector, he adds.

"[The third quarter of the year] was the busiest quarter [for take-up] since the 2022 mini-Budget, meaning that this year is comfortably ahead of where we were this time last year.

"If we have an average level of take-up in the fourth quarter, we'll be back at circa 41 million-42 million square feet, which will be the best year since 2022 and the highest level of take-up for three years."

Bavister also highlights the return of leasing deals in the 200,000 to 300,000-square-foot and the 300,000 to 400,000-square-foot brackets as a significant plus, with big-box transactions making a return after a couple of quieter years.

This, he says, is thanks to some of the larger occupiers committing to supply chain moves that they had been delaying.

For example, GXO agreed a lease with Panattoni to occupy a 885,000-square-foot warehouse in Bristol which it is understood to have taken to deliver a contract for ecommerce giant Amazon.

Bavister argues that big-box take-up was also hugely boosted by food retailers, with several major names choosing to update their distribution warehouses.

M&S signed a deal with Prologis in August to develop a 1.3 million-square-foot national distribution centre at DIRFT in Northampton, while Waitrose leased a 360,000-square-foot Bristol facility from Mountpark.

Richard Evans, head of UK logistics and industrial at Cushman & Wakefield, says this supermarket sweep of sorts was driven by food retailers' desire to improve efficiencies.

"A lot of [supermarkets] have relatively old networks, and so are seeing opportunities to consolidate their networks and improve the quality of the space they are in and look at automation as part of that drive towards more efficiencies".

Bavister adds that rivalry between the supermarkets has also encouraged them to push the button on major deals, creating a "competitive churn in the market".

He says: "In the 90s and 00s, the competition was being fought in the stores and it was a race for space. Then we moved into the convivence era of the 2010s and it feels like that battle is being played out in the supply chain."

Bavister identifies the East Midlands as the standout region for big-box leasing in 2025, continuing its performance of the last few years.

While he says the area's value-for-money appeal has traditionally swayed occupiers, he says the East Midlands has now evolved into an "established supply chain location" in its own right.

In contrast, he says London continues to face challenges around affordability. "Over a 10-year timeframe, rents have grown by 200% to 260%. That is a challenge for any occupier who is going through a go versus no-go process.

But he suggests that London rents have now peaked, while rental growth in the South East has started to tick up. "That is the market almost correcting itself. That peak [in London] has consistently come down for the last six quarters, so that dynamic is changing", he argues.

Evans says there is more activity to come from Chinese ecommerce firms next year as well as the defence sector. This year, ID Logistics took multiple sites across the UK, while Jingdong Property was also active leasing and buying warehouses in Coventry, Milton Keynes and Wigan.

Evans also suggests manufacturing firms could be busy next year. "It is always a sector that is perhaps ignored slightly although its consistently been a relatively big slug of the market in its own right but rarely gets the headlines."

Robert Taylor, partner and head of research, data and insights at DTRE, says the year started with a sense of "cautious optimism", but significant macroeconomic events created a few bumps in the road for capital markets.

This, he says, led to a year of two halves, with DTRE data showing industrial and logistics investment volumes in the third quarter of 2025 are down on those recorded in the previous quarter.

But Taylor says some positivity has returned to the investment market following Rachel Reeves' Budget at the end of last month. He says the Chancellor, so far, has managed to avoid a similar situation to the ill-fated mini-Budget of 2022, providing hope for next year.

"[This year's] Budget wasn't a Liz Truss moment. Now, you can argue whether it was a good or bad Budget depending on how you are going to feel personally about it, but what it hasn't done is blown the 10-year gilt out to the extent that property yields have to move out, and this Budget doesn’t look massively inflationary.

"In the expectation that there are no more major macro-events to derail us, all of a sudden you can see the base rate coming in, the 10-year gilt following suit, and the macro external factors that play into the capital markets easing."

He adds: "Now, that's not to say [the investment market] is going to return to 2021 and yields are going to come flying in to the mid to low 4%’s anytime soon, but it should narrow vendor-purchaser aspirations which have been apart now for nearly 36 months."

While Taylor identifies Pontegadea's circa £80 million purchase of Amazon's Knowsley facility as one of the standout single-asset transactions of the year, reflecting a circa 5% net initial yield, he says the "arms race" between the real estate investment trusts to acquire industrial and logistics businesses has "been an interesting one" for the sector.

This includes the battle between Tritax and Blackstone to buy Warehouse REIT, with the latter securing a £489 million takeover of the business in September after months of competition and negotiations. LondonMetric also acquired Urban Logistics REIT, creating a £7.3 billion portfolio.

"It feels like there is a bit of an arms race going on between LondonMetric and Tritax to see who can get the most assets under management," Taylor says. "It is interesting to see that they have chosen this moment now, with REITs still trading at a massive discount to [net asset value]."

He adds: "You've got these mega houses, Indurent, Segro, Tritax and LondonMetric all fighting it out and it'll be fascinating to see how that plays out: will they all trade to each other, or between each other, and who ultimately is going to win that battle to be the biggest and the best?"

After Tritax's failed bid for Warehouse REIT, it acquired a high-quality portfolio of logistics assets from Blackstone in October valued at circa £1 billion in what proved to be the largest industrial investment deal of the year.

Taylor says the deal is a real positive for the industry. "It's great for the sector that there are people who want to put that much money into [it and] that there are businesses like Tritax who are able to do deals of that scale.

"It shows that the sector is still in a good place because if it wasn't, those kinds of deals wouldn't happen. A deal of that scale underlines the relative importance and liquidity within the sector, and it shows how, despite the macroeconomic doom and gloom, the sector is in good health and there is good demand for the product."

Jack Farmer, head of capital markets, UK industrial and logistics at CBRE, says the big-box market has been "quite challenging" this year, making reference to wider macroeconomic factors which have led to supressed investment volumes.

He highlights public-to-private transactions as the "major news story of the year", explaining that a lot of industrial and logistics investment activity has run adjacent to those deals by Blackstone, Tritax, LondonMetric and the like.

Farmer says the trend speaks to a "market that doesn't have as much day-to-day transactional churn" and adds that he was surprised at the lack of investment activity in 2025, given some examples of "real value" available to investors.

But, he believes that the big-box market has shown signs of "coming back to life" since September and argues it is primed for increased activity next year thanks to factors such as higher take-up and completions tapering off.

"It's been a market dominated by multilet and multilet portfolio as the statistics will show, but it does feel like big-box is back and primed for a bit of activity.

"The main trend we've seen [recently] is a return of core-plus investors – we have definitely seen more of those investors being active."

"Because there hasn't been as much rental growth and the vacancy rates are still cyclically high, investors have become more interested in indexed income, so caps and collared income, and the market looks more rational in that you have core-plus and value-add investors all active.

He adds: "Core-plus buyers are seeking to acquire quite well-let, secured investments. All investors are seeking to buy reversion where they can, but value-add investors are going to face stiffer competition from core-plus investors when acquiring modern, well specified units.

With the Budget out of the way, Farmer is feeling optimistic about the start of next year. He says investors will continue to keep an eye on wider global events and their impact when making investment decisions.

"It looks like next year will get off to a really good start and as long as there aren't any major black swan events, of which we've had a number over the last three years, but any of those slightly out of control events may derail that positivity.

"All things being equal, next year will look more positive because of that backend of the year rush. Clearly the Budget might have been in investors' minds, but I think ultimately what they've got to deal with are bigger questions, more macro and questions around the UK's attractiveness... questions around the occupational market and around debt."

He added: "There is so much going on, it is hard to isolate anything around the Budget itself. But we know where we sit now and I'm hoping it all feeds into that stability calculation investors are doing and [deciding] whether they are happy to invest."

Paul Weston, regional head at Prologis UK, says the logistics sector has continued to power UK economic growth this year, with the industry more widely recognised as critical national infrastructure all but in name. Data centres were handed that official status last year.

Along with the M&S deal at DIRFT, Prologis secured another of the year's largest deals, signing Palletways UK to a new 640,000-square-foot purpose-built headquarters at Fradley Park in Lichfield, Staffordshire this summer.

It also acquired a 24-acre plot north of Dowding Way in Waltham Abbey, Essex, from Next, at the back end of the year and plans to use the land to expand its existing scheme there, delivering advanced manufacturing and logistics units.

Weston says: "This year, the UK has experienced one of the tightest industrial markets globally. High construction costs, planning restrictions and uncertainty around the Budget have all impacted supply.

"Demand for well-located, high-quality space has remained strong due to long-term structural drivers, businesses optimising their distribution networks, and the expansion of ecommerce."

He adds: "Sustainability has also continued to be a top logistics trend. As the pressure to respond to climate change intensifies, customers are prioritising modern, energy-efficient facilities that support productivity while reducing operational costs and carbon impact."

Weston insists that "well-located, sustainable, high-performing and thoughtfully designed" logistics facilities remained top of occupiers' lists this year, with businesses expecting to target the same characteristics in the year to come.