Surge in warehouse and logistics work ahead

A recovery in new industrial construction work is set to get underway in the year ahead as businesses across a range of sectors increase their investment in warehouse and logistics space.

The prospect of a revival in demand for logistics space from online retailers, a need for more capacity to support growing tech firms and the likelihood of falling interest rates all augurs well for industrial construction. So-called ‘onshoring’, where companies bring manufacturing activity back to the UK, is also helping to drive new industrial work.

Meanwhile, there is a significant backlog of previously approved industrial projects where work can get underway to meet a stronger demand for space.

Following a 6% dip in industrial sector construction starts this year, the new Glenigan Construction Industry Forecast 2025-26 predicts a 5% rise in the value of underlying industrial starts (with a total project value under £100 million) next year followed by a further 8% growth in the sector in 2026.

Investors in the industrial property sector are positive on the outlook. Last month LondMetric Property, a publicly quoted group which has been acquiring more warehouses, said: “…the logistics sector remains highly attractive and we believe that the sector’s structural tailwinds remain strong with continued online sales growth, reshoring activities, rewiring of supply chains and warehouse automation.” The group pointed to an estimate from agents CBRE that demand for logistics space is up 28% over the first three quarters of this year, compared to last year.

Growing online sales

New retail space for online retailers is one of the most promising sectors for new construction. A recent survey of the logistics sector from agents Savills noted that sales volumes of non-food goods – a key driver of demand for logistics space – has been rising. Meanwhile, online sales increased market share in the first half; up to 26.2%, from 25.4% a year earlier. Both of these factors should support new industrial build activity.

Rachel Reeves’ recent Budget, which cut the relief available on business rates for shops, should also give online retailers a further boost.

One logistics project due to get underway for Amazon UK is a £12 million storage & distribution warehouse in Barnet involving over 9,400 sq m of floor space. Detailed plans have been granted and work is set to start in the new year and run for nine months (Project ID: 21021439).

Amazon UK is also the client on the £20 million AMZ Warehouse scheme at Severn Beach in Bristol where detailed plans have been granted and a replacement contractor is being appointed (Project ID: 21529523).

Projects in the pipeline

Other significant industrial projects designed for a more versatile range of uses are also in the pipeline.

At Heritage House Enfield Logistics Hub (pictured), developer British Land has been granted detailed plans for a £56 million multi-level logistics warehouse unit which can be split between commercial, business and service buildings. The scheme is at the pre-tender stage with work on a near-42,500 sq m redevelopment set to start in spring 2025 (Project ID: 22386699).

New industrial space for expanding pharma/life sciences and technology businesses which the government is keen to foster, should also support growth in industrial construction next year.

One project in Yorkshire where detailed plans have been granted is a £50 million extension of Labcorp Drug Development’s facility in Harrogate, where work is set to start in the spring (Project ID: 24264673).

Meanwhile, the government’s recent National Planning Policy Framework should encourage local planning authorities to identify more sites for industrial space to support growth.

On one such scheme in Worksop in Nottinghamshire, Apleyhead Employment Hub, detailed plans have been submitted for the first phase of a £185.4 million scheme of eight industrial/warehouse units. The site was identified through Bassetlaw District Council’s local development plan. Work on the project is set to start next year and run for 24 months (Project ID: 20446731).

Meanwhile, the food industry is also set to remain a continuing source of new industrial construction orders. Work on a £30 million logistics warehouse for food wholesaler Bidfood at Panther Court at Chester-le-Street in County Durham is set to start in the spring. Detailed plans have been granted for the facility which will involve a floor area of around 11, 500 sq m (Project ID: 22227821).