At Property Week’s recent Industrial & Logistics Property conference in London, the UK’s leading voices in warehouse real estate offered a global perspective on the market trends driving change.
Another day, another Trump policy transforming supply chains. For warehouse and logistics real estate, Trump’s decisions are having a profound impact, especially when it comes to defence.
Claire Williams, Partner & Head of UK & European Industrial Research at Knight Frank, says Trump’s push to increase defence spending is driving more demand for logistics space.
Trump wants his Nato ‘allies’ to increase their spending, and that’s what’s happening. On February 25th, the UK’s Prime Minister set out his commitment to increase spending on defence to 2.5% of GDP from April 2027. On Thursday March 4th, EU chiefs unveiled a €800bn plan to ‘rearm’ Europe.
“More defence manufacturing is something we’ve already seen in the UK, resulting in additional take-up. We’ve seen BAE Systems taking space in Sheffield and we’ve seen the MOD acquire a semi-conductor plant in the North East,” says Williams.
She sees defence spending as likely to be a significant driver of industrial logistics demand, particularly in regions with existing defence manufacturing infrastructure.
“It will have the greatest impact where we’ve already got concentrations of aerospace engineering and advanced defence manufacturing. And connected industries, like metal fabrication for example, will be impacted too.”
Supply Chain Restructuring
According to speakers on the Market Trends panel, UK occupiers are focusing on supply chain resilience, security and bringing production processes closer to home – leading to more manufacturing on UK shores.
“ Manufacturers accounted for about a third of big box logistics take-up last year, which was quite a significant increase on previous years,” explains Tessa English, Director & Head of Urban & City Logistics at JLL.
Panellists discussed the likeliness of near & re-shoring and investment in manufacturing plants, as well as growth in warehousing space around new manufacturing locations.
Speakers agreed that gradual and strategic reshoring is underway, influenced by geopolitical uncertainty, supply chain optimisation, and the push for more resilient, localised production networks.
Would you pay more rent?
Other key topics discussed across the day included rent increases, the occupier market, ESG compliance and automation.
UK occupiers are looking to automate more, encouraged by the UK government’s recent hike in employer National Insurance payments, due to come into effect in April this year.
The occupier market is broadening, with new entrants like R&D companies (including robotics), service sector businesses, and leisure (trampoline parks for example) taking up warehouse space.
When asked if they would pay higher rent for a highly energy-efficient building, David Ives, Global Director of Real Estate & Workplace at Deliveroo, responded, “Probably not.” Pascale Newcombe from Unilever added, “We just wouldn’t rent a building which isn’t ESG compliant.”
Stability of reshoring
The conference offered significant insight from the perspective of the UK’s real estate giants, as well as their occupier clients. Whilst some global leaders nurture uncertainty, countries like the UK are seeking the stability of reshoring.
Defence may be the most significant sector to ramp up right now, but as the world becomes deglobalised, this trend is likely to impact more sectors. Will the UK have the industrial space to cope with the manufacturing of all things? And will we have the logistics space or power to support it? I suspect that supply chain strategists have never been busier.
Author – Kirsty Adams
Source: Ti Insight
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