London industrial property investment market hits 11-year low

London's industrial property investment has plummeted to an 11-year low, with yield compression stalling due to global uncertainties, trade tensions, and a softer occupier market, according to Costar.

Greater London industrial investment

In Q2 2025, industrial property investment within London's M25 motorway fell to just over £100 mln (€115 mln), an 82% decrease compared to the £700 mln (€810 mln) spent in the same period last year and the lowest quarterly volume in 11 years. This slowdown follows a strong end to 2024, which saw annual volumes reach £2.2 bn (E2.5 bn), up from £1.3 bn (€1.5 bn) in 2023 but still below the £4 bn (€4.6 bn) peak during the 2021 pandemic boom.
The decline is attributed to a lack of significant income-producing transactions and fewer data centre-related deals, which had previously boosted volumes. Some notable deals from the previous year included Segro's £110 mln (€127 mln) acquisition of Enfield Distribution Park, Kennedy Wilson's £87 mln (€100.6 mln) purchase of the Heathrow Estate, and PonteGadea's £65.5 mln (€75.7 mln) acquisition of a warehouse leased to DO & CO near Heathrow.
Despite the overall slowdown, income-focused investors are still targeting areas with strong occupier demand. For instance, Valor Real Estate Partners and RSF Partners acquired Westwood Trading Estate in Park Royal for £55 mln (€63 mln) in Q2 2025.
The absence of large transactions and fewer data centre conversions, such as Amazon's £315 mln (€364 mln) acquisition of the International Trading Estate for conversion into a data centre, have contributed to the decline.
While most activity has been in Outer London, a few Inner London deals, like International Distribution Services' sale of its Camden depot to Reef Origin for £100 mln (€115.6 mln) and Kennedy Wilson's purchase of Bromley-by-Bow Industrial Park for £37 mln (€43 mln), have supported volumes in 2025.
The weakened investor demand has halted yield compression. After falling from 5.7% in early 2024 to 5.3% by year-end, average industrial yields in London have slightly increased to 5.4%. Prime yields in prime warehouse locations remain around 4%, as seen in the Westwood Trading Estate deal, while the DO & CO warehouse sold at a 3.9% yield.
Looking ahead, investment activity is expected to rise in the second half of 2025 due to easing trade tensions, falling interest rates, and potential yield compression. However, investors will remain cautious of high vacancy rates and weak rent growth in certain London submarkets.