Columnist

Why investors are still backing the North East

As we move into 2026, the North East industrial and logistics market continues to demonstrate a level of resilience that sets it apart, particularly against a backdrop of persistent economic headwinds and ongoing geopolitical uncertainty. 

While caution remains a feature of the wider UK property landscape, the fundamentals across our region are, by and large, encouraging.

Occupier demand remains robust, underpinned by the North East’s location, competitive cost base and increasingly sophisticated occupier requirements. 

This demand, combined with a growing recognition of the region as a compelling investment proposition, continues to support market confidence.

From a rental perspective, the outlook is broadly positive.

We expect prime and modern industrial assets to see rental growth in the region of four to seven per cent over the course of the year. 

The strongest performance will be seen in assets that align with modern operational needs and, crucially, demonstrate strong ESG credentials.

In these parts of the market, demand continues to outstrip supply. 

Secondary stock will not experience the same levels of growth, but remains relevant where pricing reflects quality and specification.

A persistent shortage of Grade A accommodation continues to shape market dynamics. 

Speculative development remains limited in the short to medium-term as developers navigate higher construction costs, financing constraints and operational pressures. 

As a result, vacancy rates are expected to remain below five per cent, reinforcing upward pressure on rents.

While design-and-build solutions will provide opportunities – supported by a number of genuinely ‘oven-ready’ sites – the availability of high-quality, immediately deliverable space is likely to remain constrained.

On the investment side, appetite for North East industrial assets remains strong. 

Rising headline rents and comparatively attractive yields continue to draw both regional and national capital. 

That said, transaction volumes will ultimately be governed by the willingness of owners to bring stock to market, rather than a lack of investor demand.

Looking ahead, one potential inflection point will be the introduction of new rateable values in April 2026. 

For some occupiers, particularly SMEs, this may influence decisions around relocation, expansion or consolidation, as increased occupational costs are factored into business planning.

Sustainability is no longer a secondary consideration; it is firmly embedded in both landlord and occupier decision-making. 

High EPC targets, electric vehicle infrastructure and on-site renewable energy solutions, such as solar, are now expected. 

Occupiers are increasingly focused on reducing operational costs while meeting tightening ESG requirements, and assets that fail to keep pace risk obsolescence.

In summary, while challenges remain, the North East industrial and logistics market enters 2026 in a position of strength. 

Those who understand the nuances of supply, demand and sustainability will be best placed to capitalise on the opportunities ahead.

Keith Stewart is managing partner and an industrial and logistics property consultant at Naylors Gavin Black

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