Growth in every postcode: why industrial space matters more than ever

When people think about industrial and logistics property, the conversation often gravitates towards vast distribution centres, major logistics parks and the warehouses that power modern ecommerce.

Yet some of the most important economic activity in the UK takes place in much smaller buildings.

The industrial and logistics market below 100,000 sq ft rarely attracts the same attention as its larger counterpart, but recent research from Savills and Potter Space highlights just how significant this sector has become to economic growth, business productivity and regional prosperity.

Having recently attended Savills’ Big Things in Small Boxes webinar, one message stood out above all others for me: if the UK is serious about supporting growth, innovation and regional development, we need to pay much greater attention to the availability and quality of small and mid-box industrial space.

Supporting the businesses that drive the economy

SMEs remain the backbone of the UK economy, employing more than half of the private sector workforce. The businesses occupying industrial units of 20,000 to 100,000 sq ft are not confined to traditional manufacturing or logistics operations. They include technology businesses, professional services firms, wholesalers, healthcare providers, creative industries and specialist manufacturers.

What is particularly striking is the diversity of activity taking place in these buildings. Modern industrial space increasingly accommodates a blend of functions, combining manufacturing, research, warehousing, office accommodation and customer-facing operations under one roof. Many of these facilities support higher-skilled and higher-paid employment than is often assumed.

The sector also underpins many of the UK’s priority growth industries. Savills estimates that the Government’s key industrial strategy sectors purchase around £250bn of inputs from industrial and logistics occupiers, illustrating the extent to which wider economic performance depends on this often-overlooked market.

A national story and the rise of ‘Manchesterism’

One of the most interesting findings from the research is how closely it aligns with one of the biggest economic debates currently taking place in the UK.

The appointment of former Greater Manchester Mayor Andy Burnham as Prime Minister has brought renewed attention to the concept of ‘Manchesterism’ – a philosophy rooted in the belief that economic growth should not be concentrated in London and the South East, but driven by a more even distribution of investment, opportunity and decision-making powers across the country. Its central theme is one that will resonate with many SME businesses: prosperity should not be confined to a handful of locations but should be created in every town, city and region.

Central to that vision is the concept of reindustrialisation. Burnham has spoken about supporting every region to develop clear industrial ambitions and strengthening domestic manufacturing and production capability in strategically important sectors. At the same time, industry bodies have highlighted the critical role that logistics and industrial infrastructure will play in turning those ambitions into reality.

That is where the findings from the Savills research become particularly relevant.

Industrial and logistics property is one of the few sectors that is genuinely embedded in every part of the UK. Unlike many industries that remain concentrated in major metropolitan centres, industrial and logistics businesses operate in towns, cities and regional economies across the country. The sector provides skilled employment, supports local supply chains and creates the infrastructure that allows businesses to manufacture, store, distribute and grow. Logistics UK described the sector as employing people in every constituency and contributing £175bn in gross value added to the UK economy each year, while supporting around eight per cent of the national workforce.

The findings from the Savills research reinforce that message – and the East Midlands provides a particularly interesting example. The region is identified as one of the areas most affected by suppressed demand, with a shortage of suitable industrial space constraining business growth and expansion opportunities. Despite these challenges, it continues to demonstrate strong market fundamentals, reflecting sustained occupier demand and robust rental performance.

Similar supply constraints can be seen elsewhere. In the West Midlands, take-up remains above pre-pandemic levels while available supply has fallen to less than one year’s worth of demand. Comparable conditions are evident across South West and Wales and the M27 corridor. These are not isolated property market issues. They highlight the extent to which access to modern industrial space has become a prerequisite for economic growth.

In that sense, industrial and logistics property provides a practical illustration of what “Manchesterism” could look like in practice. If the objective is to create growth in every postcode, businesses need the space to innovate, manufacture, trade and expand. Industrial and logistics property may not always command the same attention as major infrastructure projects, but it is often the foundation upon which regional prosperity is built.

The supply challenge

Perhaps the most important theme emerging from both the webinar and the accompanying research is the growing mismatch between demand and supply.

Over the last decade, stock growth in the sub-100,000 sq ft market has significantly lagged behind larger industrial developments. While demand has remained resilient, the pace of new development has not kept up. As a result, availability rates remain below the level typically associated with a balanced market.

Savills estimates that nationally demand has effectively been suppressed by around 35 per cent over the last decade because suitable space has simply not been available. The report suggests this has resulted in lost economic output worth billions of pounds and tens of thousands of jobs that might otherwise have been created.

Current market data reinforces the point. Across the prime mid-box market, supply fell by nine per cent year-on-year during the first quarter of 2026 and most major regional markets now have less than two years of available supply. In several regions, the figure is closer to one year or less.

This scarcity is also helping to support continued rental growth despite wider economic uncertainty. Occupiers remain active and demand remains broad across multiple sectors.

The looming EPC challenge

Alongside supply constraints, another issue repeatedly raised during the webinar was the impact of future energy efficiency requirements.

From 2031 it is proposed that all private rented buildings over 1,000 square metres in England and Wales will need to achieve an EPC rating of B (where cost-effective to do so). While the objective is understandable, the challenge for much of the existing industrial stock is substantial.

According to the research, only around 21 per cent of existing sub-100,000 sq ft industrial stock is currently expected to meet the required standard by 2031. By comparison, larger industrial buildings are generally in a much stronger position.

This creates what several contributors described as an EPC “cliff edge”. Owners of older assets may face difficult investment decisions, while occupiers could see further pressure on the availability of suitable accommodation if significant volumes of stock become non-compliant.

From a legal and property perspective, this is an issue that landlords, investors, occupiers and developers should already be considering. Asset management strategies, lease negotiations, refurbishment programmes and acquisition decisions are all likely to be influenced by the direction of travel on energy efficiency regulation.

Looking ahead

Despite the challenges, the overall picture for the sector remains positive.

The market continues to benefit from diverse occupier demand, strong underlying economic fundamentals and growing recognition of the role industrial property plays in supporting business growth. At the same time, development pipelines remain relatively constrained, meaning that well-located, high-quality space is likely to remain in demand.

For developers, investors and public sector stakeholders alike, the message is clear. Small and mid-box industrial property is no longer a niche asset class sitting in the shadow of larger logistics facilities. It is an essential part of the UK’s economic infrastructure – and its growth ambitions.

This therefore has to be borne in mind by all decision-makers, from planners through to policymakers.

If the Government is serious about reindustrialisation and achieving its ambition of spreading opportunity more evenly across the country, the availability of modern, flexible and sustainable industrial space will be critical. Businesses cannot grow without places from which to operate, manufacture, innovate and distribute.

The debate around “Manchesterism” may be new, but the lesson from the industrial and logistics sector is not. Growth in every postcode requires more than political ambition. It requires the physical infrastructure that enables businesses to succeed. The big things happening in small boxes deserve far more attention than they currently receive.