UK lost €11b due to lack of industrial and logistic workspace

Since 2010, the UK has lost 140,000 jobs and £9.7 bn (€11.4 bn) in economic output due to a persistent shortage of industrial and logistics (I&L) workspace.

Logistics - Savills

This "undersupply," highlighted in a report by Savills and the British Property Federation (BPF), means businesses haven't had the space they need to expand, especially in key areas like the Midlands, London, and the South East.

The report, "Industrial & Logistics: The Infrastructure Of Everything," indicates that the availability of I&L space has been below a healthy 8% for over a decade. If supply had kept pace with demand, demand would have been 37% higher between 2010 and 2024.

Several factors are hindering development, such as a slow planning system, with only 18% of major applications decided within the 16-week statutory period, and 26% taking over a year.

Current planning policies don't fully recognise the economic importance of I&L space. Unlike housing, there are no targets for employment land, leading to insufficient allocation in suitable locations.

More than half (51%) of I&L demand isn't linked to housing or population growth, requiring better real-time market data for accurate forecasting.

New Minimum Energy Efficiency Standards (MEES) set for 2030 (requiring an EPC 'B' rating) pose a risk. 73% of existing I&L space currently falls below this standard, potentially making large portions unlettable and further impacting jobs and economic output.

Despite these challenges, demand for I&L space is set to grow due to various structural drivers.

Over half (57%) of leased I&L space between 2019 and 2024 went to businesses outside of traditional logistics and manufacturing.

Retailers accounted for 26% of leases, driven by the continued growth of online spending.

Science, R&D, professional services (20%), and information companies, including data centres (7%), are increasingly leasing I&L space, fuelled by the boom in AI and the digital economy.

Increased government spending on defence is projected to require an additional 285,000 m2 of I&L space by 2027.

Paul Weston, regional head of Prologis UK and chair of the BPF Logistics Property Board, said: “This report makes clear that constrained supply is holding back jobs, investment and productivity across the country. If we are serious about growth, we need an environment that supports the delivery of modern, sustainable developments in the right locations. With the right conditions in place, our sector can accelerate delivery, support emerging industries and play a central role in strengthening the UK’s long-term economic resilience.”