SHW Q3 2026 Focus
A tale of two halves for the South East Industrial & Logistics market
Figures for the first half of 2026 tell two different tales across the South East Industrial & Logistics market, with take up in core South London areas stalling while, outside of the M25, take up is much stronger, with rents rising in some regions.
SHW’s Q3 South East Industrial & Logistics Focus indicates that occupier activity strengthened across the region during the first half of 2026. Away from South London, a marked change has seen increased activity in the large and mid box sectors of units over 60,000 sq ft with a number of transactions already completed or close to going under offer.
Tim Hardwicke, SHW’s Partner and Head of Agency, says: “Although we have seen good levels of enquiries, vacancy rates outside of the M25 have increased in most centres with older second-hand stock making up the majority of this space as occupiers look to upgrade or rationalise their holdings.
“Though quoting rents have increased in some areas, such as Crawley/Gatwick, we have seen a move to an occupier’s market and, as a result, in some locations there has been downward rental pressure and greater incentives being offered to secure tenants. Elsewhere, rents have broadly remained static across the South East, although in some cases have reduced marginally, especially where optimistic rents were being quoted, due to occupier push-back. In this market it’s important not to over quote or units will stick.”
Green buildings with lower running costs remain attractive for occupiers, however the main concern has now switched to affordability, especially for small to medium sized companies, due mainly to higher operating costs from business rates and NI increases. Occupiers are typically also taking longer to make any decision to move.
In H1 of this year, occupier take up (over 5,000 sq ft) in SHW’s core South London region (Croydon, Coulsdon, Mitcham & Merton) reached just 70,675 sq ft, (196,500 in the whole of 2025), still significantly down from the levels seen across 2020 to 2023, where the norm was around 450,000 sq ft for the full year. It is worth noting that typically the second half of each year, usually sees a greater take up. The highest rent achieved has increased slightly to £22.50 per sq ft (from £22 per sq ft in 2025), and logged demand is still headlining at 4.8m sq ft for the first 6 months however, if occupiers are able to stay put, they will.
Crawley & Gatwick, on the other hand has seen a rise in quoting rents to £25 per sq ft, up from £21.50 per sq ft in 2025. Leasing has also shot up, with the first six month of this year showing take up at 248,800, almost 100,000 sq ft above the whole of 2025. Availability is now relatively low at 667,000 sq ft, compared with a logged demand of 3.5 million in this year. Link 23 in Handcross is catering for demand at smaller end of the market, with Unity, Horley and Gatwick 33 catering for the mid-range (33,000 sq ft to 87,752 sq ft).
In Elmbridge, Kingston & Richmond, rents have jumped by £1 per sq ft to £21, with a highest quoting rent of £24 per sq ft. Demand of over 4 million sq ft far outweighs availability.
Across Sutton, Chessington, Epsom & Leatherhead, rents have dropped slightly from a high of £25 per sq ft in 2025, to £24 per sqft this year. Take up is encouraging, with 61,500 sq ft already transacted this year (117,000 sq ft for the whole of 2025), and demand is ten times that of availability.
In Brighton & Hove, rents remain level at £17 per sq ft. Although demand remains high, take up is stalling at just 6,000 sq ft transacted so far this year as occupiers search for the right type of building from slim pickings with just 108,500 sq ft available. Freshfield Estate in Brighton is catering for trade centre demand and Fairway Trading Estate about to undergo a refurbishment to offer units from 53,321 to 73,000 sq ft.
Tim adds: “Looking forward, we expect occupier-led conditions to persist into the second half of the year, with continued demand for larger units, and growing availability of second-hand stock promoting further refurbishment opportunities. Rental pressure will continue with incentives remaining central to deal structures.”
Access the interactive Industrial & Logistics Focus.
Global uncertainty stalls occupier moves in H1 across the South East Office market
Global uncertainty has stalled larger occupier moves, resulting in low levels of take up across the South East office market in the first half of the year, according to SHW’s Q3 2026 South East Office Focus. However, despite global events, H2 is showing signs of confidence with notable agreements for lease signed and unsatisfied occupier requirements still to fulfil.
Take up over 5,000 sq ft – the minimum size in which the Focus report starts to track data – has been slow to date across most centres in the South East, with sub-5,000 sq ft deals making up a large proportion of transactions. Tim Hardwicke, SHW’s Partner and Head of Agency, comments: “In this size range we have seen a trend towards occupiers seeking fitted space in order to get away from high initial set-up costs.
“The outlook at the beginning of the year was more positive with several buildings under offer, however events across the world have knocked occupier confidence and although the ‘flight to quality’ continues, with companies looking for best quality space for their staff, it is taking longer for decisions to be made.”
As business and employment costs increase, occupiers are looking hard at property costs, how much space is needed and larger incentives are often needed to reach quoting rents. As a result, buildings offering great space with amenity at competitive rents and/or larger incentives are likely to see higher letting activity. Successful lettings in key towns are encouraging investors to spend on refurbishment and repositioning however debt funding for this is becoming harder to secure.
Croydon is demonstrating the trend for smaller transactions, with just 13,000 sq ft completed over the 5,000 sq ft level so far this year. Rents remain level at £36.50 per sq ft achieved, with highest quoting rents at £41 per sq ft. Availability is just under 500,000 sq ft, with demand around three times this amount.
In Epsom & Leatherhead, take up figures are encouraging at 21,500 sq ft transacted (over 5,000 sq ft) so far this year, compared with a total of 32,000 sq ft for the whole of 2025. However, these figures are still a long way off 2023 levels (87,600 sq ft). Logged demand is twice that of availability, which has pushed rents up to £31 per sq ft achieved (up from £29.50 per sq over the last two years).
In Guildford, rents have remained level at £50 per sq ft achieved this year, however, take up is some way off 2025 levels (90,581 sq ft) which just 12,929 transacted this year. Demand is triple that of availability (1.4m sq ft / 373,750 sq ft). Tempus Court in central Guildford is one option for occupiers looking for ‘plug and play’.
The Crawley Gatwick area is showing more positive signs. Although rents have dropped slightly to £37.50 per sq ft achieved – level with the highest quoting rent – take up is already double that of 2025 at 63,250 sq ft transacted (32,500 sq ft total in 2025), edging back up to levels seen across 2022 to 2024. Options for Grade A new and refurbished buildings include St John’s House, The Create Building and Portland, 25 High Street in Crawley, offering space ranging from 3,090 to 41,966 sq ft, along with 2 City Place providing 10,580 to 23,942 sq ft adjacent to Gatwick Airport.
In Brighton & Hove, a mixture of newly refurbished space, including Napier House, 10 Middle Street, Imperial House and Queens Road Quadrant are catering for a range of occupiers with options between 1,954 to 35,833 sq ft. While rents remain level at £44 per sq ft, the highest quoting rent is around £50 per sq ft and take up is slow so far with just 12,000 sq ft transacted above the 5,000 sq ft level. However, with agreements for lease signed on two lettings of circa. 18,000 sq ft at Brighton’s Sovereign House, signs of confidence are returning which could push rents on before the end of the year.
In the smaller market of Eastbourne and the surrounding areas, while rents have dropped to £13.50 per sq ft (£15 psf in 2025), take up has almost doubled that of the whole of 2025 this year to date, leaving only 12,000 sq ft available, with demand at around 400,000 sq ft. Ivy House has just 1,237 sq ft available and Sovereign Harbour, Eastbourne is providing a serviced office offering.
Access the interactive Office Focus.
Ongoing planning delays and debt finance costs impacting South East development
SHW’s Q3 South East Development Focus reports that ongoing planning delays, rising information requirements and elevated debt finance costs are continuing to weigh on development activity and suppress prices being paid for sites across the region. Developers are becoming increasingly selective, prioritising prime locations unless a non‑prime opportunity offers a clear and compelling upside.
Peter Coldbreath, Partner at SHW, says residential developers are navigating a market where sentiment remains fragile and costs continue to bite. “Developers are being more selective and focussing on prime locations, unless there is a significant upside on considering non‑prime locations,” he says. “House price indices are largely flatlining and there is little expectation of change while volumes traded remain subdued. The uncertainty spilling into market sentiment from global conflicts continues to overshadow UK performance, and we are now watching closely to see whether the new administration can shift both sentiment and the underlying metrics.”
Across London and the South West M25, delays in pre‑application and planning processes continue to stall deals that rely on consent. Price sensitivity is shaping the market, with overpriced opportunities failing to transact. Developers are favouring housing schemes over flats, and viability concerns, particularly around high build costs, are driving strong demand for PD and conversion schemes. In Croydon town centre, consented PDR schemes are set to deliver around 1,600 new homes, though Gateway 2 requirements have slowed the rate of starts on site.
In Kent, Surrey and Sussex, smaller sites remain the focus for developers and investors targeting family housing. Viability challenges persist for flatted schemes, where cost pressures dominate buyer thinking. Slow sales rates and extended holding periods are adding further drag, and housebuilders are quietly positioning themselves by exploring strategic land opportunities ahead of any future uplift in sentiment.
Richard Plant, Partner at SHW, notes that underlying demand for homes across boroughs such as Croydon, Bromley, Sutton, Lewisham, Southwark and Greenwich remains strong, but buyers have become far more price‑sensitive as mortgage costs and affordability pressures intensify. “Developers are finding sales rates significantly below pre‑2020 levels, particularly for higher‑density apartment schemes,” Richard says. “For most South London schemes, the main challenge is not planning permission but development viability. Elevated construction costs, Building Safety Act compliance, contractor contingencies, higher finance costs, slower sales and affordable housing requirements are combining to stall many schemes that already have consent.”
Institutional capital remains interested in London’s residential market, particularly Build‑to‑Rent, where confidence in long‑term rental demand is strong. However, investors are favouring operational assets and proven locations, avoiding major development risk.
In the South East commercial property development market, demand for prime industrial and logistics sites remains robust where pricing is realistic. Aspirations often exceed what appraisals can justify, but competitively priced opportunities continue to attract strong interest. Non‑prime sites are still transacting, albeit at lower levels, and anything with planning restrictions or limited hours of use tends to see muted engagement. Planning itself is frequently taking twelve months or more, even for allocated sites, with delays, surveys and red tape adding cost and frustration for developers.
Occupier demand remains dominated by storage and distribution, accounting for around 80% of enquiries. Virtually all schemes are targeting EPC A and BREEAM Very Good or Excellent as occupiers push harder to meet ESG commitments and contractual requirements for greener buildings.
Access the interactive Development Focus.
Out‑of‑Town Retail Continues to Outperform as Demand Surges and Supply Tightens
The out‑of‑town retail sector has continued to outperform the wider retail market in the first half of 2026, demonstrating remarkable resilience despite ongoing economic headwinds, according to SHW’s Q3 2026 Out-of-Town Retail Focus, with consumer preference for convenience‑led formats, particularly for food and essential retail, remaining a key driver of this strong performance.
Demand across the sector is robust and wide‑ranging. Discount retailers including B&M, Home Bargains and The Range continue to seek new representation, while food operators at both ends of the market remain highly active. Lidl, Aldi, The Food Warehouse and FarmFoods are pursuing further opportunities, and M&S Simply Food is accelerating its expansion programme, highlighted by the opening of its largest regional store in the former Homebase unit in Godalming.
Traditional out‑of‑town categories such as furniture, kitchens and DIY continue to generate steady demand, but the most notable shift has come from high street operators. Next, Superdrug and Mountain Warehouse have all acquired new out‑of‑town stores, reflecting the growing appeal of retail park formats. Leisure operators, particularly gyms and padel clubs, are also competing for space, adding further pressure to already constrained supply.
The food and beverage market remains one of the most competitive segments, with new entrants including Pret A Manger, Popeyes and Chick‑fil‑A actively targeting prime locations. Although the major coffee operators have slowed their roll‑out slightly, overall demand in the sector remains strong.
Availability, however, is increasingly limited. Vacancy rates remain below five per cent, but this headline figure masks the reality that a proportion of the remaining space is obsolete and unlikely to return to active use. Much of the recent transactional activity has been driven by units released following the failures of Carpetright and Homebase, most of which were acquired quickly, leaving very little stock still on the market. This constrained supply, combined with sustained demand, is placing upward pressure on rents, although evidence of rental growth remains inconsistent outside the food and beverage sector.
Across the South East, the shortage of available units is particularly acute. Crawley and Brighton have seen no recent prime availability, while Croydon has experienced movement around IKEA, with Decathlon relocating from its standalone Purley Way store into a concession within the IKEA building. Eastbourne has also seen activity, largely driven by food and beverage operators, as Sovereign Retail Park continues its repositioning and new units are proposed for Starbucks and Greggs at Lottbridge Drive.
Richard Pyne, Partner at SHW, said: “Out‑of‑town retail continues to demonstrate its strength and resilience, driven by both retailer confidence and sustained consumer demand. The challenge now is supply. In many locations there is simply no available stock, and where units do come forward, they are being taken quickly. Despite the wider economic backdrop, this part of the market remains one of the most dynamic and competitive, and we expect that momentum to continue.”
Despite the broader economic climate, sentiment in the out‑of‑town sector remains positive. Retailers continue to trade well, customers continue to favour the format, and demand continues to outstrip supply, reinforcing the sector’s position as one of the most stable and strategically important areas of UK retail.
Access the interactive Retail Focus.
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