Strong demand for industrial space set to create new opportunities

Growing demand from businesses for new warehousing and logistics space is set to drive a marked revival in industrial construction activity during 2024 and beyond.

Despite falling industrial starts this year, the new Glenigan Construction Industry Forecast 2024-25 highlights the strong development pipeline for new projects which points to better times in the sector next year.

After the value of main contract awards for industrial work rose 18% in the first nine months of this year compared to last year, Glenigan is forecasting new project starts will rise by 17% in 2024 and by a further 21% the following year.

The revival in new industrial construction reflects growing investor confidence that demand in the sector is on the rise, both from online retailers and elsewhere.

A recent report from property agent Cushman & Wakefield, UK Logistics & Industrial Outlook highlights deals in the sector in the third quarter involving 6.7 million sq ft of space, up 6.4% on the previous three months. Meanwhile, investment in the sector exceeded £2 billion for the first time since autumn last year.

“Our Q3 stats point to early signs of recovery within the occupational market, with a significant increase in the volume of space under offer,” said Richard Evans, head of UK logistics & industrial at the agent. Businesses offering third-party logistics services have been the largest source of take-up of industrial space this year.

Strong pipeline

The report also notes a strong development pipeline with 37 million sq ft of logistics space now available on speculative schemes which are either recently completed or under construction, up from 33 million sq ft over this summer. It points to ‘persistent pockets’ of under-supply, particularly for larger Grade B and Grade C industrial units, which bodes well for future construction activity.

The mood amongst developers in the industrial sector is also positive. In a trading update last month, David Sleath, chief executive of Segro, the UK’s largest industrial developer, said: “Occupier market conditions remain supportive with demand in line with longer-term trends and supply constrained in our chosen sub-markets.” During 2023, the group expects to make development capital spending worth £500 million, with a further £100 million, which was originally budgeted for this year, set to continue into 2024.

Major logistics scheme

One major industrial project in the pipeline at Segro is a new rail freight terminal and logistics scheme at the former Radlett Aerodrome in Hertfordshire, where it completed on a £120 million purchase of almost 420 acres of land in June.

Planning permission has been granted and work on the £400 million Freight Interchange Development (pictured) – which will involve up to 3.6 million sq ft of logistics space including B1 and B2 warehouses – is due to start early in the new year and run for 60 months (Project ID: 06096151).

Glenigan data highlights numerous other significant industrial/logistics projects due to get underway which should support the revival in the sector in 2024.

In West London, outline plans have been submitted and tenders are invited for a £61.6 million Blueprint Southall Development Phase 3 development of light industrial and commercial units. Work on the project is due to start next summer and run for six months (Project ID: 22265557). 

Meanwhile, detailed plans have been submitted for a £29.7 million scheme of four industrial/warehousing units at Worsley near Manchester, involving nearly 33,000 sq m of space. Work is set to start next spring and run for 11 months (Project ID: 23357863).