Industrial and logistics businesses need flexibility to thrive as well as survive

Rob Champion, Partner and Head of Industrial & Logistics at leading property consultancy Fisher German, believes the need for flexibility is more important than ever for businesses to not only survive, but thrive.

2024 was a challenging year in most sectors with investment decisions postponed due to the General Election and the Autumn Budget in October, and it is understandable that there is still a degree of uncertainty among industrial and logistics businesses.

As we move into the second half of Q1 2025, the economic outlook remains uncertain, influenced by both domestic and global factors. The impact of the changes to National Insurance and National Minimum Wage to employers in April and the actions of President Trump since taking office, are contributing to this uncertainty.

Poor retail figures over Christmas and declining sales in January contributed to the Bank of England’s concerns about stagflation although the ONS has since reported 0.4% growth in December which was unexpected given the wider doom and gloom. Financial experts anticipate a further cut to interest rates following January’s reduction, though further reductions may be limited if inflation persists.

There is, however, a silver lining: Chancellor Rachel Reeves has pledged to support major infrastructure projects to enable growth, alongside changes to the National Planning Policy Framework. This indicates a genuine governmental ambition to lay the groundwork for the delivery of housing, employment and key infrastructure development. These positive ambitions have been complemented by a busy first two months of the year where an array of meaningful requirements have hit the market and key transactions, negotiated in the second half of 2024, have been exchanged or completed.

The sale of a 140,000 sq ft multi let industrial investment on behalf of a Worcestershire-based property company to Marchmont Investment Management underlines the ongoing appetite for quality last mile and local business assets. The estate, with a rent roll in excess of £1m per annum, will form part of a new Joint Venture with Invesco known as Space Industrial.

Furthermore, our clients Clowes Developments have secured the pre-sale of a new bespoke 72,000 sq ft building to CLEAN Linen and Workwear on the highly successful Fairham Business Park, Nottingham. This transaction represents a key investment from an innovative company seeking to meet the highest efficiency and sustainability standards. The new facility will incorporate the latest automation and laundry technology advancements whilst also delivering 250 new jobs to the area.

Occupiers will continue to seek supply chain resilience, including the onshoring of manufacturing and maintaining adequate inventory.

Strategic locations will continue to be key with sites providing access to road, rail and ports (inland and coastal) seeing the highest demand.

Power, however, remains a critical issue especially with growing levels of automation, the implementation of AI, and robotics. We anticipate a rise in smart warehouses and their adaptation to accommodate autonomous delivery in the coming years. Those sites that can deliver power will prove to be highly valuable particularly where this benefit is complemented by the other locational benefits.

We must be mindful however that there has been rising levels of vacancies within existing stock over the past 12-18 months, suggesting the potential for some turbulence particularly when higher operating costs start to take effect from April. Proactive asset management is essential; landlords must recognise the increasing competition and ensure their buildings are fit for purpose in a more competitive marketplace. Investment in asset improvements, modern, intelligent interior design and sustainability credentials will give competitive advantages as the supply and demand balance shifts.

There will also be a continued focus on regulation as occupiers strive for higher environmental standards and information security, particularly in future-oriented buildings.

All these factors mean the market’s evolution requires greater flexibility in building design for adaptation and flexible leasing arrangements. We may see a greater number of campus style developments like Frasers at Ansty (Coventry), Nike at Corby and DSV at Mercia Park, Leicestershire, where focal points of innovation and investment are supported and encouraged as part of the growth agenda.

While there is much positivity within the industrial and logistics sector for 2025, it must be balanced against the changing dynamics of the market, continued economic uncertainty and likely further influence from decisions made in the States (in particular). A focus on UK growth, support from central government and greater liquidity should see exciting times ahead as we move on through this year and we have some significant projects in our pipeline which look set to emerge and thrive.