The UK Government has recently released ‘Invest 2035: The UK’s Modern Industrial Strategy (opens a new window)’, a green paper that outlines how it seeks to drive growth within various UK industries, over the next 10 years. Following a consultation, the Department for Business and Trade is reviewing feedback and aiming for publication in spring 2025.
Real estate companies — specifically those operating within the industrial and logistics sectors — can play a big role in these plans. Core opportunities are already clear, allowing investors and real estate owners to develop a strategy that aligns with the Government’s goals, whilst addressing potential risks.
What is the UK’s Investment Strategy?
In the face of rapid change within the global economy, Industrial Strategy aims to foster certainty and stability within UK industries — enabling organisations to invest and grow with confidence. Among various policies, the Government aims to grow UK industry through planning system reform, assistance in unlocking private investment, and tax breaks.
The Government has identified eight industries as having the “highest growth potential”:
Advanced manufacturing
Fit-for-purpose industrial warehousing is essential for supporting 3D printing, robotics, and other industries that are contributing to the Fourth Industrial Revolution.Clean energy industries
Flexible logistics services will be crucial for supporting the wider transition to net zero as supply chain complexity increases.Creative industries
Keen to stimulate growth within the creative sector, the UK treasury announced a 40% reduction (opens a new window) in business rates bills for UK film studios.Defence
Amid heightened geopolitical tensions and the continuing war between Russia and Ukraine, the UK is expected to raise defence spending from 2.3% of GDP, to 2.5%. (opens a new window)Digital and technologies
Alongside the US and China, the UK is the only other nation to have a tech ecosystem valued at over $1 trillion (opens a new window) — infrastructure will be key in enabling UK companies to scale up.Financial services
Construction of robust and secure data centres could be vital to support an industry that provides 8.8% of the UK’s (opens a new window) total economic output.Life sciences
The UK’s world-class ability in research and development within life sciences could be further capitalised on via new laboratories, scale-up facilities, and improved infrastructure.Professional and business services
Industrial and logistics assets will be critical to help the UK Government’s attempts to diversify this sector beyond its concentration in London and the South East. (opens a new window)
The role of the real estate sector
Industrial Strategy aims to foster “growth that is long-term, sustainable, inclusive, and resilient”. The industrial and logistics sector will need to play an integral role to help attain these goals by providing fit-for-purpose, specialised buildings to support these industries.
Organisations that invest and possess industrial and logistic specific assets will be crucial for supporting businesses operating in each of the separate industries earmarked in Industrial Strategy. Improvements in infrastructure will be “foundational to success across our growth-driving sectors”, according to the Government.
Planning reforms
Industrial Strategy aims to provide support for investors navigating the planning system via a “new planning triage service”. The UK government views a rejuvenated and effective planning system as a “fundamental enabler for business investment”.
The Government acknowledges that planning constraints can impede growth — at both the national and regional level. Reforms within planning can issue firms with the desired predictability and efficiency when applying for consent to begin projects.
Implementing clear, consistent guidelines could make the system more transparent and decisions a lot more predictable — a shift that would reduce costs and expedite development. Proposed revisions to the National Planning Policy Framework (opens a new window) reflect this, recognising that logistics development and strategic infrastructure works are “key to delivering growth (opens a new window)”.
Outlook for 2025
Beyond the development targeted in Industrial Strategy, the logistics sector could provide a boost of up to £7.9 billion per year to the UK’s GDP (opens a new window) in productivity gains by 2030. It is important that real estate organisations enact separate growth strategies for 2025 and beyond. Organisations must remain agile in a time of technological advancement, evolving tenant requirements, and geopolitical instability.
The vacancy rate of industrial and logistics spaces has been rising since 2022. The latest Q3 2024 figure was 7.2%, however it appears that the rate at which it is increasing has started to slow (opens a new window). Confidence in investment remains unstable due to challenges that are impacting businesses’ bottom lines, such as the recently announced rise in employers’ National Insurance (NI).
Property owners may want to look at upgrading existing properties to make them more attractive to specific industries. Sustainability, labour, and power availability are increasingly critical for site selection and lease negotiations. The demand for energy-efficient projects is rising — on-site renewable energy and electric-vehicle charging infrastructure will be a necessity for some tenants. As a key point of differentiation within the market, investors integrating sustainability into projects are more likely to attract high-quality occupiers.
The availability and quality of technology within facilities is also shaping logistics real estate. Automation and AI-powered facility management systems enhance efficiency — making them highly desirable. Investors embracing these advancements can enable themselves to stay ahead of market trends — particularly as the rise in employers’ NI makes the adoption of automation and technology more attractive.
Insurance considerations
While Industrial Strategy offers opportunity to real estate and construction companies, growth and development within industrial and logistics may invite threats your organisation hasn’t previously encountered or considered. Insurance can be crucial for mitigating these threats, and risk factors that will need to be considered, include:
As manufacturing industries grow, more tenants are undertaking higher risk trades which may lead to bigger losses in the insurance market. Understanding your tenants’ risks is vital in your duty of providing a fair presentation of risk to insurers.
Construction of green amenities, such as solar panels and EV charging points, will need careful consideration to ensure they are installed correctly and properly maintained — reducing chances of fire loss and other damages.
Introduction of advanced facility management systems may also bring a greater cyber risk. Investors should consider whether this threat requires cyber insurance for appropriate mitigation.
Increased development of assets to attract new tenants will lead to further considerations around risk exposure. Your risk register should be consistently reviewed to determine whether additional coverage is necessary.
Sufficient site security is paramount to mitigating loss, including for vacant properties, which will need to be disclosed to insurers.
Enhancements of your property may lead to increased reinstatement costs in the event of a loss. You should consider whether your property requires an updated reinstatement valuation.
For further information, please visit our Global Real Estate and Construction page (opens a new window) or contact a member of the Lockton team.
Lockton Global Real Estate and Construction practice is holding the Industrial & Logistics Seminar and Panel Discussion, on Wednesday, 4 June 2025, in London. To register your interest in attending this event, please follow the link here (opens a new window).
