The industrial sector has been one of the more reliable parts of the commercial property market for some time now, which has led to a fairly consistent narrative that it is still 'strong' and, by implication, relatively straightforward. However, that is only partly true.
There are still deals being done, and demand has not fallen away in the way some expected, but the tone of the market is now steadier, and that is where the detail really starts to matter. What we are seeing is not weakness, but a period of normalisation, and alongside that has come a much narrower margin for error than many have been used to.
The market is active, but no longer in a hurry
If you look at the underlying data, the industrial sector is still holding up well. Research from Savills indicates that take-up has remained above the long-term pre-pandemic average, by around 27% over recent periods, which does not point to a constrained market.
At the same time, the pace has become more considered, with transactions taking longer to complete and occupiers spending more time weighing up decisions before committing. Savills also notes that deals are taking longer to transact, reflecting a more deliberate approach from both occupiers and investors.
Expansion is still taking place, but it tends to be driven by clear operational need rather than a sense that it is simply the right moment to move.
That change in behaviour feeds directly into how deals are brought forward, because where momentum once helped to carry transactions through, there is now a more deliberate process in place, and that tends to bring any weaknesses into view much earlier than before.
Rental growth is no longer doing the heavy lifting
Rental growth has been one of the defining features of the industrial story in recent years, and it has also, in many cases, supported deals that might otherwise have required a greater degree of scrutiny.
That support is still there, but it is far more limited than it was. Savills forecasts rental growth of around 2.5% to 3% for 2026, with projections generally sitting within a range of roughly 2.3% to 3.5% depending on asset type and location.
That remains positive and still provides a level of support, but it is not enough to offset weaker fundamentals elsewhere within a transaction.
A clearer divide between prime and everything else
One of the more noticeable developments is the widening gap between prime and secondary assets, which is now much more visible in how deals are received and assessed.
Demand for well-located, high-quality stock remains strong, and these assets continue to attract interest, particularly where there is a clear occupational story underpinning them. In some cases, that interest still translates into competition.
Further down the spectrum, the position is more conditional. Secondary stock is not without demand, but it often requires a more detailed explanation, a stronger narrative and, in many cases, a greater degree of patience.
Savills has also pointed to a clear “flight to quality” across the logistics market, where demand is concentrating around the strongest assets, while anything less well positioned is taking longer to transact.
That divide has always existed to some extent, but it is now far more pronounced, and the market is simply less willing to overlook compromises that might previously have been accepted.
This tends to become apparent quite quickly for brokers, as two deals that appear similar on the surface can be viewed very differently once asset quality, location and tenant strength are fully considered.
Borrower strength and structure are back in focus
As the broader tailwinds ease, attention naturally turns to the borrower and the structure of the deal. Track record matters more, not as a general concept, but in terms of what a borrower has actually delivered in comparable situations, and how that experience translates into the current proposal.
Exit routes are also being examined in greater detail, particularly where they rely on assumptions that may no longer feel as comfortable as they once did.
Structure has also moved higher up the list of considerations. It is not a secondary detail that can be refined along the way, but something that needs to be well thought through from the outset.
In many cases, it is the structure that determines whether a deal progresses or not.
That does not necessarily mean that deals are harder to fund, but it does mean that they need to be better constructed.
A more exacting market, but not a weaker one
It is easy to look at these changes and assume that the industrial sector is losing momentum, but that is not quite what is happening.
Instead, the focus has returned to the fundamentals, with asset quality, borrower strength and deal structure now carrying far more weight in determining outcomes.
This does not remove opportunity for brokers, but it does mean that the deals most likely to progress are those that are clearly thought through, supported by realistic assumptions, and presented with a strong underlying case. They can still be done, but they need to stand on their own merits.
