JLL UK big box logistics market update – October 2023

JLL UK big box logistics summary

October 25, 2023
  • Jon Sleeman
  • Ed Cole
  • Joel Duncan
Key headlines
  • The amount of floorspace transacted in Q3 2023 slipped back compared with both Q2 and Q1.

  • The overall level of supply immediately available and under construction, including under offer space, was 3.4% lower at the end of Q3 compared with mid-year.

  • Prime headline rents rose by 8.6% in the 12 months to the end of September 2023, but the rate of growth has slowed over the course of 2023 to date.

  • Whilst investment volumes remain muted a significant amount of capital continues to track the sector and recent evidence suggests that the core end of the market remains competitive as investors focus their requirements on this market segment.

  • Prime logistics yields are trending stable but secondary assets may come more pricing pressure.

  • Overall, the occupational market is seeing a cyclical adjustment in terms of demand, but the fundamentals driving the need for high quality logistics space remain compelling.

Occupier demand

In Q3 2023 the take-up of Grade A floorspace in the big box market totalled just 2.9 million sq ft across GB involving 14 transactions. 

This brought the overall quantum of space transacted in the first nine months of the year to 12.0 million sq ft, following take-up of 4.1 million sq ft in Q2 and 5.0 million sq ft in Q1.

The contraction in take-up in Q3 reflected a combination of factors. First, in terms of the basic maths, there were fewer transactions in Q3 (14) compared with both Q2 and Q1 (21 in each) and the average size of transaction while slightly higher than Q2 was lower than the Q1 average. Second, deals continued to progress very slowly. If anything, the time taken to conclude transactions has increased over the year in part because they have come under an increasing level of scrutiny at board level by corporate occupiers.

There is no discernible pattern in terms of the main types of businesses that signed up for space in Q3, and the number of transactions is too small to draw any real conclusions. The 14 transactions were signed by 13 different companies; retailers, logistics service providers and manufacturing companies each accounted for three transactions, whilst five transactions fitted into our ‘other’ category and, in this quarter, included a disparate range of businesses.

Regionally, the Midlands both East and West proved to be the most resilient in Q3 in terms of attracting demand with the East Midlands accounting for six of the 14 transactions and the West Midlands accounting for four. In floorspace terms these two regions accounted for 81.0% of the floorspace transacted with the East Midlands accounting for 55.5% the West Midlands for 25.5%. No other region saw more than one Grade A transaction. This points to the traditional core distribution markets in the centre of the country retaining their appeal to occupiers and reflects a case of ‘flight to prime’.

We still believe that occupier demand is stronger than the level of transacted floorspace indicates and there is a healthy amount of deals under offer, but there is no doubt that the market has slowed, and very probably the longer deals take the more chance they are of becoming ‘at risk’. At the end of Q3 some 3.4 million sq ft was under offer within the standing stock of buildings or space under construction.


At the end of Q3, our headline total available supply figure stood at 33.7 million sq ft across GB, including space under offer. This total comprised some 22.2 million sq ft of immediately available space in new or secondhand/refurbished buildings and a further 11.5 million sq ft in space speculatively under construction/refurbishment. In addition to this headline level there was 6.1 million sq ft available by way of assignment or sublease, often referred to as ‘grey space’.

The headline level of supply is some 1.2 million sq ft (-3.4%) lower than the corresponding mid-year level and the composition of supply changed over the quarter as the contribution made from space under construction declined and that accounted for by completed buildings rose, countering fears that supply will heavily outstrip take-up in this slower period of the market. At the end of September, immediately available space in completed buildings accounted for 66% of available floorspace (up from 56% at mid-year) while the share accounted for by space under construction fell to 34% from 44% at mid-year. This shift highlights a slowdown in new speculative construction starts, a trend we think it likely to continue in the near-term, particularly if demand remains subdued.

Regionally, the East and West Midlands accounted for the largest shares of total headline supply at 22.3% and 15.5% respectively.

Rental growth

Despite the slowdown in demand, JLL’s GB logistics rent index, based on achievable prime headline rents in 32 markets across the country, still increased in Q3 as it has over the past year, but the rate of growth moderated. In Q3 growth eased to 1.1% following 1.8% in Q2 and 4.0% in Q1. Growth over the first nine months of 2023 was 7.1% and 8.6% in the 12 months to the end of September.

Investment market

The market continues to witness a lack of stock as volumes remain subdued compared to recent years. Whilst volumes remain low a significant amount of capital continues to track the sector and there has been some recent evidence to suggest that the core end of the market remains competitive as investors have focused their requirements into this part of the market. This is mainly due to the continued positive rental growth projections and the continued movement towards more ESG compliant product. This is particularly apparent in the core urban markets.

A notable deal for the quarter was the purchase of Coventry Logistics Park by DTZ Investors from Bericote and JP Morgan for £140.4 million reflecting a net initial yield of 4.5%. This scheme comprises three assets totalling 784,898 sq ft let to DHL, Geodis and Viad and a WAULT of 11.81 years, with all three leases benefitting from rent reviews to the higher of the open market or CPI, ‘cap and collared’ between 2% to 4%.

For development, Panattoni has recently acquired a 26-acre site in Sittingbourne, Kent from Abrdn with the site benefitting from planning consent for two units of 439,228 sq ft and 205,320 sq ft respectively. Panattoni intends to start speculative construction of both units before the end of 2023 with completion scheduled for Q4 2024.

JLL held its assessment of prime logistics yields stable over the quarter at 4.75% in London, 5.00% in the South East and 5.25% in the main Regional markets. Pricing for prime assets is trending stable but secondary assets could come under further pressure.


Quarter 3 saw some more positive news on the UK economy in terms of GDP growth, inflation and interest rates. Data revisions by the Office for National Statistics mean that the UK economy is now estimated to have grown by 1.8% between the start of the Covid pandemic to Q2 2023, whereas previously it was believed to have contracted by 0.2%. CPI inflation also came in lower than expected in August (at 6.7% pa) which was one reason why the Bank of England’s Monetary Policy Committee held Bank Rate stable at 5.25% in September, following 14 consecutive meetings where rates were increased.

However, economic growth remains fragile and inflation is still well above it target level - the September CPI figure was unchanged on August. Short-term forecasts suggest economic headwinds remain, but we think the fundamentals supporting occupational demand for good quality logistics space are robust.

In the past these fundamentals have included population growth, e-commerce growth and supply chain restructuring. These and other factors will continue to play their part in driving a continuing demand for logistics space, but we believe the new overarching narrative will be the UK’s transition to net zero. This is a written into UK law and all industries and businesses will need to adapt and change. Buildings and transport are among the largest producers of carbon and logistics and supply chains are dependent on both. In the long-term, decarbonisation will be a key driver of demand for new logistics buildings. We are already seeing this impact market demand, but it is still early days. In one way or another, the transition to net zero will be a key demand driver of the future.