Vacancy rates across the industrial and logistics (I&L) sector have spiked, climbing from 3.5% in 2023 (opens a new window) to 6.92% by Q3 of 2025 (opens a new window), according to CBRE. Rising supply chain tariffs are driving up costs, disrupting trade flows, and denting consumer confidence, leaving landlords and investors to feel the strain.
Beyond affecting income, empty properties also invite various risks. This article aims to illustrate the challenges for landlords with vacant assets, and how risk mitigation can protect properties until tenants are sourced.
Changes in the I&L market
I&L growth is projected at a robust 3.5% per annum (opens a new window) – outpacing the pre-COVID ten-year average of 2.6%. However, optimism among investors is cautious, many firms that had expanded may now have more square footage than required, while others are pausing their growth plans.
Recovery is uneven, and supply and demand imbalances are emerging across I&L sectors and regions. Third-party logistics providers, e-commerce firms, and food operators have scaled back after record expansion, while consumer and non-food retail brands continue to commit to large sites. Regionally, prime logistics hotspots remain tight, but secondary areas face growing oversupply.
Are ESG concerns shifting expectations?
Greater supply is giving occupiers more choice and reshaping their expectations and growth strategies.
ESG standards are now decisive factors for tenants and investors. Landlords face mounting pressure to deliver assets built for electrification – from EV charging to renewable power – and for sustainability through solar panels and energy-efficient design. Buildings that meet these demands command a growing ‘power premium’. New environmental rules only intensify the pressure to become energy efficient.
But ESG now extends beyond the environment. The social dimension is reshaping how investors think. Many want to be seen as partners in the sector’s growth, not just profit-driven owners. They expect landlords to demonstrate social value – supporting communities, improving workplaces, and helping the industry evolve. It marks a shift from transactional thinking to long-term, purpose-led investment and it will impact how occupiers look at certain sites.
Staff wellbeing matters
Attention is also turning to people and wellbeing. Occupiers are assessing whether their buildings are large enough – and well laid out enough – to include breakout areas and other facilities that support staff wellbeing. A positive environment helps attract and retain talent, boost productivity, and reduce absenteeism.
These are core people risks that drive up costs, and landlords must act accordingly to stay competitive. As expectations change, tenants are moving to spaces that better meet their needs, returning more second-hand stock to the market (opens a new window) – often at lower value.
Topline risks intensify
These forces are reshaping the market and creating a faster-moving, more complex risk landscape – one that landlords can’t afford to ignore. They also amplify traditional I&L property risks, particularly for vacant buildings that are staying empty for longer.
High vacancy rates pose a direct financial threat to landlords, eating into returns and undermining asset value and resale prices. The strain doesn’t stop there: without a tenant in place, landlords must cover business rates, insurance, and maintenance costs that can quickly mount into six figures each year, eroding investment value.
For leveraged landlords, the pressure is even greater. When rent stops, it’s not just cash flow that suffers – it’s credibility. Many rely on joint-venture partnerships with private equity firms instead of banks, pitching business plans built on promised returns. But when those plans falter, confidence can collapse fast. In this market, reputational damage can spread faster than financial loss, making it harder to raise capital and rebuild trust.
Physical threats escalate
Empty properties don’t just lose income – they also attract physical risks. Threats that should be on the radar of I&L landlords, include:
Arson remains a common threat in the I&L sector, with fires often causing multi-million-pound losses and years of disruption.
Fly-tipping is another recurring issue. Waste dumped overnight can fill entire units and cost thousands to clear.
Unauthorised groups can occupy land at empty sites, harming assets and driving up claims and premiums.
Without adequate inspection or maintenance, water leaks discovered too late can cause significant, and avoidable, damage.
Theft is more commonplace in empty assets. We have seen claims run into millions where people have stolen expensive materials from vacant properties, such as copper pipes.
Whether it’s fire, waste, or waning investor confidence, empty buildings magnify loss. The longer a property sits idle, the greater the financial and reputational damage. As pressures mount – from shifting expectations to rising costs and physical risks – proactive risk management is no longer optional. It’s essential to protecting value and trust in an increasingly exposed market.
Act before problems arise
Strong on-site security is the first line of defence – random inspections and monitored alarms deter intruders and speed up emergency response. Furthermore, regular property checks catch internal issues early, such as leaks or damage that could escalate if left unseen. Barriers, locked gates, and concrete blocks also restrict access and deter illegal encampments.
Insurers reward proactive mitigation plans. Clients who manage risk – not just insure against it – can earn better terms and lower premiums. The best rule of thumb? Act as if uninsured. Prevention protects both assets and reputation.
No risk exists in isolation. Property, people, financial exposures, and reputation are all connected – and addressing one demands an understanding of them all. The solution lies in joined-up thinking: combining deep sector expertise with strong insurer partnerships and a clear grasp of operational realities.
It’s this collaborative approach – aligning insight from risk managers, insurers, landlords, and investors – that turns volatility into resilience. By connecting the dots between physical, financial, and human risks, the industry can move from reacting to disruption to anticipating it.
The most effective risk strategies are built on partnership. Contact us to find out more.
Further insights are available via our Real Estate (opens a new window) page.
