In February, we highlighted a clear shift in the UK warehouse market. Occupiers are increasingly trading up into better quality buildings rather than simply expanding into more space. That trend is now beginning to feed directly into the warehouse fit out and equipment supply chain.

The key point for investors to be aware of is that a warehouse move does not necessarily end with the signing of a new lease. It can result in significant capex requirements. When an operator moves into a better building, they rarely transfer the legacy operational equipment. The move becomes the natural point to redesign racking layouts, improve space utilisation, increase pallet density and review the full material handling strategy. Modern buildings are better suited to narrow-aisle truck operations, lithium-powered fleets, shuttle systems, conveyors, robotics and wider warehouse automation. These upgrades are increasingly being used to improve throughput, reduce picking times, increase storage density and create more resilient operations in a sector still facing labour availability, wage inflation and retention challenges.

Industrial services companies particularly those active in racking, material handling, warehouse design, automation integration and compliance are the companies delivering the upgrade work. Fit out spend can range from several hundred thousand pounds for smaller distribution facilities to several million pounds for larger, more complex warehouse operations.

We believe this cycle has several years of runway. The UK’s industrial and logistics building stock remains mixed in age and specification, while occupiers continue to assess energy efficiency, labour productivity, operational resilience and automation readiness when selecting facilities. Although the precise future trajectory of commercial EPC requirements remains subject to policy development, the direction of travel is clear: older, less efficient assets face increasing pressure, while modern, operationally efficient warehouses are better positioned to attract demand.

We are already seeing increased M&A interest on the supply side across racking, material handling and automation services, and we expect this to continue as investors look for companies that can capture the capex cycle following warehouse relocation, refurbishment and operational upgrades.

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