Avison Young reports 11% increase in Big-Box take-up in 2024

New analysis by Avison Young of the industrial and logistics sector highlights a notable rebound in the take-up of grade A big-box distribution units over 100,000 sq ft in 2024, with a total of 21.2 million sq ft leased throughout the year, an 11% increase from 2023. Despite remaining 33% below the five-year average - a comparison skewed by exceptional demand during the global pandemic - improving occupier sentiment and a surge in deal-making helped push volumes above last year’s levels.

The Midlands, particularly within the ‘Golden Triangle,’ continues to dominate the market, accounting for 42% of all leasing activity in 2024. Prime locations in this area remain a key draw for both occupiers and investors, underlining its status as a hotspot for logistics and distribution activity.

At the close of 2024, grade-A supply stood at 51.6 million sq ft across 220 units, representing a 9% increase from the previous year. Of this, 41% are newly completed speculative units, while 39% are second-hand units and 20% are still under construction. However, a significant shortfall remains in the supply of larger units, particularly mega sheds of 400,000 sq ft and above, with only 10% of the current pipeline meeting this demand.

Investment in single-let big-box distribution units saw a dip in 2024, with total spending amounting to £1.04 billion, down 12% from 2023 and 62% below the five-year average. This downturn reflects broader macroeconomic challenges, though the sector’s strong fundamentals continue to attract interest, as evidenced by a substantial increase in investment activity during Q4. £423 million was invested in single-let distribution units in Q4, up by 116% compared to the previous quarter. This resurgence suggests a more favorable outlook for 2025, with further activity anticipated in the coming year.

Avison Young reports that with inflation easing and interest rates expected to decrease gradually, market conditions are expected to stabilise, fostering more activity in the capital markets. The sector's strong potential for delivering robust returns compared to other asset classes continues to make it an attractive investment option. The analysis predicts a rental growth rate of 4.3% over the next five years for the logistics sector, outpacing office (3.4%) and retail (1.8%) sectors, driven by sustained demand in prime locations.

David Willmer, Principal and Managing Director, Industrial and Logistics at Avison Young, said:
“Looking ahead to 2025, the outlook is more positive, driven by a decline in inflation and anticipated interest rate cuts, although at a more gradual pace than originally expected. This should stimulate greater activity in the capital markets, while the sector’s potential for delivering strong returns compared to its peers remains clear. Despite high stock levels and an imbalance in shed sizes, prime headline rental growth continues to be resilient, particularly in prime locations, underlining the strength of the industrial and logistics market.”

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