LOGIC: Logistics Sector Update - Spring 2026
UK Logistics Sector: 2026 Outlook
By Eddie Richards & Sadie Pitman
2025 proved a steady if not spectacular year in the industrial and logistics investment market, with rents continuing to provide returns and investment in UK warehousing accounting for a large percentage of well-balanced investment portfolios. Growth tailed off towards the back end of the year, perhaps unsurprisingly with escalating global tensions and the uncertainty the 2025 budget brought domestically, but there are positive signs for 2026 with baseline rental growth for the UK logistics sector projected to be 3.2% per annum.
Investment stability
Borrowing costs are expected to ease this year with markets factoring in multiple interest rate cuts. This combined with strong tenant demand, ongoing geopolitical uncertainty underpinning a nearshoring strategy and desire to have an inventory buffer should see core investors begin to return to the UK market. Our recent appointments indicate that portfolio transactions are dominating the market with a number of large portfolios coming to the market late 2025 and more in the pipeline for H1 2026.
Regulatory and legal developments
Limited speculative development and constrained land supply position landlords bringing new efficient stock to the market favourably for a ‘green’ rental premium. Minimum Energy Efficient Standards (MEES) which currently prevent lettings of properties with a sub ‘E’ EPC rating are expected to tighten, with the proposed target being a minimum of ‘B’ by 2030 and potentially an earlier compliance window of a minimum ‘C’ rating from April 2027 requiring upgrades to older sub-standard buildings. Most new developments also now attract a mandatory 10% biodiversity net gain and this becomes mandatory for nationally significant infrastructure projects from May 2026. Proactive capex programmes and ensuring environmental and ecological requirements are factored into scheme design from the outset (such as by optimising space so as to minimise habitat loss, and reducing pollution and sediment run-off during any works) will be a necessity for portfolio holders, with early movers and those bringing efficient assets to the market likely to be rewarded with enhanced asset values and tenant appeal. 2026 should start to see the impact of the Planning and Infrastructure Act 2025, which received royal assent in December, and introduces major reforms including streamlined approval processes for major infrastructure and housing projects, revised compulsory land purchase rules and modernisation of local planning authorities to accelerate decision-making.
The government announced proposals to update the business rates regime in the Autumn budget (to support the permanently lower business rates for small retail, hospitality and leisure properties) with a high value multiplier for properties with a rateable value above £500,000, set to face increased business rates liabilities from 1 April 2026. This change is likely to affect the industrial sector disproportionately owing to the high number of larger buildings and distribution warehouses albeit following the publication of the draft 2026 Rating List the general consensus for the warehousing sector is that it could have been a lot worse. The Employment Rights Act 2025 begins phased rollout, altering zero-hour contracts, "fire and rehire," and trade union rights—potentially significant changes for labour intensive logistics operations. Further regulatory developments on the horizon include the UK sustainability reporting standards, currently under consultation on the introduction of mandatory sustainability reporting for listed companies, based on the yet-to-be-finalised UK Sustainability Reporting Standards. Once implemented, this will impact any UK listed company – including overseas companies with a UK listing. For a more detailed look at the wider real estate changes expected this year and beyond, please see UK Real Estate Sector: 2026 and Beyond.
Supply chain resilience
Supply chain volatility remains a defining theme within the industrial sector with geopolitical instability continuing to shape inventory and sourcing strategies. We are likely to see a doubling down of key themes amongst UK operators:
- Electrification of logistics fleet and increased automation (see our separate piece on AI and Automation in the UK Logistics Sector) will require investors and occupiers to invest in EV charging and grid capacity upgrades. Onsite energy requirements to supplement the grid will only increase.
- Tariff uncertainty and the rates changes will heighten occupier appetite for flexible occupational arrangements, requiring creative deal structuring to balance the market demands and requirements with investor returns and robust portfolio valuation.
- Sites with transport links and proximity to workforce catchments will continue to command a premium.
Data centres and the growth of AI
The data centre market is often in direct competition with more traditional logistics assets in terms of land supply and energy reservation. Last year the Government updated the National Planning Policy Framework (the NPPF) in order to bolster the construction of data centres, by introducing a requirement for local planning authorities to identify suitable locations for data centres and creating an avenue for development via its new grey belt policy (which we discussed here and here). The Government has now launched a consultation on further proposed reforms to the NPPF. The reforms maintain the above but go one step further in requiring development plans to take into account AI Growth Zones. The Government intends to:
- Reduce electricity costs and accelerate grid connection times for AI Growth Zones, for example by removing speculative demand in the queue (which we discussed here);
- Streamline the consenting process, with the Government exploring whether consent timelines can be cut to 12 months for those larger projects that use the Nationally Significant Infrastructure Project regime; and.
- Assist local planning authority capacity, by creating a national team of AI data centre planning experts who will provide both direct advice and grant funding to local authorities considering data centre applications.
Developers and investors will be following the consultation with interest, and it remains to be seen how the government intend to balance this with other competing priorities such as increased defence spending.
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