UK warehousing faces a critical moment as costs rise and infrastructure ages
Warehouses rarely make headlines, but they sit at the heart of the UK economy.
From the food on supermarket shelves to the parcels arriving on doorsteps the next morning, the country’s supply chains depend on an enormous network of logistics hubs quietly storing, sorting and dispatching goods across the country.
Yet despite its importance, the UK’s warehousing sector is entering a period of significant pressure. Rising business rates, stricter environmental regulations and an ageing property stock are forcing operators to rethink how the industry will evolve over the coming decade.
For businesses across the economy, the stakes are high.
A £163bn industry powering UK supply chains
The scale of the sector is often underestimated. According to the UK Warehousing Association, warehousing and logistics contribute around £163bn in Gross Value Added to the UK economy, supporting millions of jobs and underpinning sectors ranging from retail and manufacturing to pharmaceuticals and construction.
Over the past decade, the industry has expanded rapidly. Research from Savills shows the amount of warehouse space in the UK has grown from around 428 million square feet in 2015 to nearly 700 million square feet today, an increase of more than 60%.
Much of this growth has been driven by the shift to online retail. Warehouses have increasingly become the operational backbone of the digital economy, enabling retailers to process orders, manage returns and deliver goods at unprecedented speed.
Online retailers alone have increased their warehouse footprint by 813% since 2015, growing from 8 million sq ft to 69 million sq ft of logistics space.
At the same time, businesses across multiple sectors are holding more inventory closer to home as they look to strengthen supply chains following pandemic disruptions and geopolitical instability.
Demand is strong, but supply is tight
Despite the rapid growth in logistics space, availability remains extremely limited.
Warehouse vacancy rates across the UK were just 3.3% in 2022, highlighting how little spare capacity exists in the market.
The pressure is particularly visible in large distribution centres. Over the past decade, the development of warehouses exceeding one million square feet has increased by 345%, reflecting the needs of major retailers and logistics operators handling large volumes of goods.
Third-party logistics providers remain the largest occupiers of warehouse space, now accounting for 128 million square feet across the country.
But while demand continues to rise, much of the UK’s existing warehouse infrastructure is ageing.
An industry built on older buildings
A major challenge facing the sector is the age of its property stock.
Industry estimates suggest 82% of UK warehouses were built before 2000, meaning many facilities lack the energy efficiency, automation infrastructure and operational flexibility expected in modern logistics operations.
New environmental regulations will soon place further pressure on older buildings.
Since April 2023, commercial buildings must have at least an EPC rating of E in order to be leased. That threshold is set to increase to rating C by 2027 and rating B by 2030.
The implications for the warehousing sector could be dramatic
Studies suggest 18% of existing warehouse space could become unusable by 2027, while as much as 60% may become unlettable by 2030 if buildings are not upgraded.
In a market already struggling with extremely low vacancy rates, the potential loss of such a large portion of warehouse stock could significantly reshape the sector.
Rising business rates add to the pressure
Alongside the cost of upgrading facilities, warehouse operators are also facing growing financial pressure from property taxation.
Business rates represent one of the largest fixed costs for logistics companies, particularly for large distribution centres that occupy significant amounts of space.
Recent revaluations have pushed up the rateable value of many logistics buildings, reflecting the sector’s strong demand and rising property values.
For companies operating multiple warehouses, the increase can translate into substantial additional annual costs.
Industry leaders say this combination of rising taxes and regulatory requirements is creating a challenging environment for many operators.
A spokesperson from SFI Logistics, a UK commercial logistics and warehousing provider, says the sector often operates out of the spotlight despite its economic importance.
“Warehousing often sits behind the scenes, but it powers almost every part of the UK economy. From retail and manufacturing to healthcare and construction, businesses rely on reliable storage and distribution networks to keep supply chains moving.
“As demand for logistics space continues to grow, investment in modern facilities and supportive policy will be key to ensuring the UK has the infrastructure it needs to compete globally.”
Planning and land shortages
Even as demand rises, building new warehouses is not always straightforward.
Industry groups have long argued that the UK planning system makes it difficult to deliver large logistics developments, particularly near major population centres where demand is strongest.
While warehouses can create significant local employment and support regional economic growth, planning policy has historically prioritised residential development over logistics infrastructure.
As a result, several regions now face shortages of both suitable development land and modern warehouse space.
Many of the UK’s largest logistics hubs have therefore clustered around key motorway corridors, particularly within the so-called “Golden Triangle” in the Midlands, where transport links allow goods to reach most of the UK population within a few hours.
Warehouses are evolving beyond storage
The role of warehouses is also changing.
Modern logistics hubs increasingly operate as complex operational centres rather than simple storage facilities. Many warehouses now handle packaging, product assembly, repairs, returns processing and recycling.
Advances in automation and warehouse management systems are also transforming how facilities operate, allowing businesses to track inventory in real time and process orders far more efficiently.
This evolution is helping warehouses move further up the value chain, becoming essential infrastructure for the modern digital economy.
Investment will shape the next decade
Despite the challenges, demand for warehouse space is expected to continue rising.
Online retail penetration in the UK is forecast to exceed 30% by 2028, while many companies are also exploring near-shoring strategies that bring parts of their supply chains closer to domestic markets.
Both trends will likely increase the need for modern logistics facilities.
The question for the sector is whether investment can keep pace.
Upgrading ageing warehouse stock to meet energy efficiency standards will require billions of pounds in capital over the coming years. At the same time, companies must continue investing in automation, digital systems and workforce training to remain competitive.
For policymakers, the challenge will be ensuring regulation supports this transition rather than slowing it down.
Because while warehouses rarely attract the attention given to ports, railways or roads, they play an equally critical role in keeping the UK economy moving.