UK occupier market overview: Occupier demand remains resilient - Q3 2026

A total of 9.6 million sq ft of logistics space was taken up across the UK in Q3 2026, down 7% on Q2, and 8% below the five-year quarterly average. The vacancy rate remained stable q/q, at 8%, but remains higher y/y.

Occupiers Focused On Quality

Occupiers continue to focus overwhelmingly on Grade-A (new or refurbished) space, which accounted for 59% of all take up in Q3 and 58% of take up in 2026 YTD. This represents a significant shift from recent years, with Grade-A space accounting for just 26% of take up on average over the past five years.

Higher vacancy rates are giving occupiers greater choice, and many occupiers are responding to the current market conditions with increasingly rigid requirements in terms of size, fit-out and location.

Demand for fitted or partially fitted space remains high, as occupiers seek to minimise upfront capital expenditure and accelerate occupation. Power availability, clear heights, floor loading capacity and automation-ready specifications are also becoming increasingly important decision drivers.

An increasing number of businesses are prioritising operational flexibility and speed to occupation. This is driving up competition for existing Grade-A space, particularly if the occupier can benefit from a previous tenants’ fit-out.

Vacancy Rises, But Quality Space Remains Tight

Availability decreased to 96.3m sq ft at the end of Q3, falling by 0.8m sq ft throughout the quarter.

New, speculatively built space accounts for 29% of the total available floorspace, while second-hand space represents 71%. The second-hand space available is dominated by lower quality stock, with Grade-B or worse representing 63% of the total.

The vacancy rate remained stable q/q, at 8.0%. Meanwhile, the Grade-A vacancy rose slightly from 4.4%, to 4.6% at the end of Q3. Occupiers continue to focus on securing higher-quality accommodation, second-hand Grade-A space remains particularly favoured where an incoming tenant can make use of an existing fit-out.

A Slight Uptick In Development Activity

At the end of Q3, 67 speculative schemes (over 50,000 sq ft) were under construction, totalling 11.2 m sq ft, up from 56 schemes totalling 7.7m sq ft at the end of Q2. Despite this q/q increase, development remains modest; with elevated construction and financing costs continuing to pose viability challenges.

Outlook: Supply Constraints Support Rental Growth

Knight Frank's enquiry metrics, alongside resilient take up levels in Q3, point to continued occupier momentum heading into the final quarter of 2026. While enquiry volumes were 7% lower q/q, they remain at their fourth-highest level since Q1 2022, indicating that ongoing geopolitical tensions and domestic political uncertainty have had little impact on occupiers' willingness to progress real estate decisions.

Despite improving sentiment and greater stability in financing markets, development activity remains constrained. Consequently, occupiers seeking well-located, high-quality space are likely to face increasing competition, with Grade-A availability continuing to tighten and development pipelines remaining limited.

These supply constraints are already supporting rental growth. Six of the UK's nine prime regional markets reported annual rental growth this quarter, while 31 of the 69 prime submarkets tracked by Knight Frank recorded annual rental growth (units over 50,000 sq ft).

Average rental growth is forecast at 3.4% in 2026, easing from 4.2% in 2025 before moderating further to 2.7% in 2027, and rebounding to 3.4% in 2028 (Knight Frank Insight),  marking an upward revision on our Q2 forecasts. While average rental growth is expected to moderate next year, constrained development activity and limited availability of modern Grade-A space are expected to continue supporting prime rental growth, particularly in core distribution markets.