Scale matters: larger warehouses driving UK logistics

Large distribution warehouses are again at the centre of the UK property market – as companies rethink supply chains, invest in automation and look for faster ways to move goods around the country, demand for modern big box logistics space is strengthening.

The large distribution warehouse has re-emerged as one of the defining pieces of infrastructure behind the modern supply chain.

The latest figures suggest underlying demand is robust. Take-up of large logistics space reached almost 300,000sq metres in 2025, the strongest result since the post-pandemic boom. And occupancy has moved above 93% for the first time since 2022, an indication that new space continues to be in demand.

A significant part of this activity reflects a change in how companies organise their supply chains. Many occupiers are stepping back from networks of smaller warehouses to concentrate operations in fewer, larger distribution centres.

There are practical reasons for this shift: automation, more sophisticated inventory systems and the constant pressure to improve productivity all favour scale – a modern one million square foot building can replace several older sites, simplifying operations and reducing transport movements.

For retailers, manufacturers and third-party logistics groups, large warehouses have become a strategic necessity. In 2025, 3PL operators accounted for about 58% of big box take up across the UK. A prominent example of this trend was the GXO lease at Panattoni Park Avonmouth, which was the largest speculative letting last year. This level of activity underlines the central role outsourced logistics providers now play in modern supply chains.

The wider economic climate has created some hesitation. Political uncertainty and fiscal changes have weighed on sentiment at times. Even so, the level of activity in the sector remains notable. Around 1m sq metres of space is currently under offer and several major requirements are still circulating, particularly from retailers expanding distribution networks and defence related manufacturers strengthening domestic supply chains.

When demand of that scale meets a relatively limited development pipeline, the broader direction of the market becomes easier to read. Rental growth, while modest, has continued. Average rents for UK warehouses larger than 100,000sq ft rose by roughly 3% in 2025, reaching about £11.95 per sq ft. Investment activity tells a similar story.

UK industrial property investment reached around £11.5bn last year and picked up momentum toward the end of the year. Investors remain drawn to large logistics assets for a straightforward reason. They sit at the centre of supply chains that businesses depend on every day.

Several longer-term forces continue to shape the market. Ecommerce growth has stabilised, but the infrastructure required to support it remains extensive. Many companies are also building greater resilience into their supply networks after years of disruption. Geography still matters as well, with regional hubs capable of reaching most of the UK population within a few hours continuing to hold clear advantages.

For developers, this environment is bringing speculative development back into view. When supply chains are evolving quickly, occupiers often need buildings immediately rather than years down the line. Anticipating that demand requires capital, confidence and the ability to deliver modern logistics space at scale.

Large commitments to established logistics corridors reflect this thinking. Panattoni’s near-£1bn investment in Swindon is one example of developers positioning themselves for the next phase of distribution demand.

Occupational demand in 2025 was more than 12% above the pre-pandemic average, while forecasts still point to continued rental growth and a shortage of modern logistics space.

Under those conditions, development follows. What has changed is how these buildings are viewed. The big warehouse is no longer simply a property asset. It has become part of the country’s economic infrastructure, shaping how goods move, how businesses operate and how supply chains are organised. In short, the big box warehouse is now a critical piece of the UK economy.

This is a guest post by James Watson, Panattoni’s head of development, Southern England and London