Industrial and logistics: Navigating uncertainty

As the tenth anniversary of the Brexit vote approaches (arguably a catalyst for the political instability the UK continues to experience), we explore how the industrial and logistics market, highly sensitive to global political and economic shifts, is adapting. With change and uncertainty now the only constant, the market has evolved to assess, understand and respond to each compounding challenge more rapidly than ever before.

In this piece, we highlight key themes emerging from our conversations with clients, and consider where the market is now and how it may evolve further over the coming years.

The leasing landscape: Upwards-only rent reviews

The prohibition on upwards-only rent reviews due to take effect next year marks a fundamental shift in a legislative framework that has otherwise been remarkably stable, even as more flexible rent mechanisms have gained traction in the market. What distinguishes this moment, however, is not just the direction of change but the uncertainty surrounding its final form.

Key details, such as the treatment of caps and collars, remain unresolved, leaving investors, landlords, funders and occupiers having to try and anticipate what the market will look like. In response, market participants would be well advised to avoid standing still; many are already actively stress-testing assumptions, reworking underwriting models and engaging in scenario planning to ensure resilience across a range of possible outcomes. 

Power constraints and infrastructure

The availability of power, both in absolute terms and within a viable timeframe, has become a defining constraint on industrial and logistics developments, introducing risk not just to new schemes but to existing assets where preserving capacity is critical to investment value. As a result, prioritising infrastructure planning is shifting becoming an absolute necessity.

However, there is no single solution. Developers and investors are exploring a variety of options, from microgrids and on-site solar to battery storage and more active capacity management, with even non-solar generation entering consideration in more constrained locations. The common emphasis across each response? Maintaining flexibility in the face of an unclear path forward.

This uncertainty is also evident in lease negotiations: Landlords seek to maintain and protect existing supply, while tenants resist shouldering the burden of paying for unused capacity. Resolving this tension requires new approaches that balance flexibility with protection in a market where future energy needs (and availability) remain difficult to predict.

Planning pressures and policy challenges

Across the built environment sector, the planning system remains a key source of delay and uncertainty. While recent updates to the NPPF offer some incremental improvements, pressure on an already stretched system continues to constrain delivery.

This uncertainty is increasingly shaping how developers structure their pipelines. Rather than relying on a single planning outcome, schemes are being designed with greater flexibility. Greater thought is being given to phasing, alternative use cases, and tenant-focused adaptability. Fallback positions are becoming increasingly common as a way to preserve optionality in a system where consent, timing, and even policy direction cannot be taken for granted. Conflict between residential and industrial and logistics usage is likely to remain in the planning headlines for some time to come.

Evolving occupier requirements

Occupier requirements continue to evolve, but the defining feature is a shift towards flexibility in response to uncertain operating conditions. Lease structures are being pushed towards shorter terms and greater optionality, particularly for tenants exposed to variable or contract-driven demand.

At the same time, uncertainty over future needs is influencing building design. Developments are increasingly expected to be adaptable from the outset – both in planning and specification – with features such as higher eaves heights and greater floor loading capacities supporting a wider range of potential uses over time.

This need to manage uncertainty is also reshaping deal structures. Rather than simply reducing upfront costs (although that often remains a key factor, balancing rent deposits with fit out capex), there is a developing focus on limiting long-term exposure. Whether through phased take-up with options rather than obligations over additional space, or qualified repair and reinstatement liabilities, the direction of travel is clear. Occupiers are seeking to reduce commitment and retain optionality in a market where future space requirements, and the pace of change, are increasingly difficult to predict.

The rebalancing of ESG priorities

Although ESG has been a central focus in recent years, the current environment is prompting a more pragmatic application. In the face of cost pressures and a focus on viability, alongside regulatory change, property owners, developers and occupiers alike are placing greater emphasis on measures that deliver clear, measurable operational or financial benefits, rather than pursuing purely aspirational targets.

This reflects a broader need to achieve near-term viability while navigating uncertainty around future standards. Repurposing existing stock (retaining embodied carbon while reducing delivery risk) aligns with this approach, as does the growing appeal of modern second-hand space. While not always best-in-class or built to suit, it can offer a quicker, lower-commitment route to occupation with environmental performance and suitability are within acceptable parameters, balancing sustainability with flexibility in an uncertain landscape.

Regional variation

The industrial and logistics market across England remains highly fragmented, with performance and dynamics varying significantly by location, even within individual sub classes. As a result, strategies that succeed in one market may not translate directly to another, particularly as local factors drive divergent outcomes in rental growth, yields and vacancy.

In this context, uncertainty is less about the direction of the market and more about its consistency. The choice between speculative and build-to-suit development, for example, is increasingly location-specific, requiring a more granular and evidence-led approach. For investors and developers, this places a premium on local insight and flexibility, with success dependent on the ability to adapt strategies to market-specific risks rather than relying on a single, national narrative.

Changing deal dynamics

The accumulation of uncertainty is ultimately having a clear impact on deal dynamics. While the intent to transact remains strong, decision-making has become more conservative, with approvals pushed later in the process and often subject to additional internal gateways.

This, in itself, creates a further layer of uncertainty. Transactions are progressing in a more conditional and iterative way, as parties seek to maintain momentum while preserving the ability to pause or withdraw as risks evolve. However, this more cautious, staged approach conflicts with the continued desire to transact quickly and efficiently – introducing friction into the process and, in some cases, increasing the risk that ultimate delivery becomes more uncertain rather than less, even where commercial alignment exists.

The themes outlined above point to a market defined less by any single challenge and more by the need to navigate constant change. Success will depend not just on identifying the issues ahead, but on responding to them with flexibility, clarity and a willingness to adapt as conditions evolve. Those best placed to succeed will be those who can distinguish between short-term disruption and lasting structural change, and position themselves accordingly.

If these dynamics are playing out in your own portfolio or pipeline, or if you are grappling with similar uncertainties, our industrial and logistics team would welcome the opportunity to discuss how best to navigate them with you.

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