Full House at OYO Park Signals Industrial Squeeze Beyond the M62

The announcement that OYO Business Park near Hull has reached full occupancy, following a fresh round of lettings driven by industrial and logistics occupiers, is a small but telling data point in a much larger story about the UK's constrained supply of good-quality industrial space. Developed by regeneration specialist Wykeland Group, the East Yorkshire scheme's completion of its letting programme reflects a pattern now visible from Teesside to the Thames Estuary: demand for mid-box and small-unit industrial accommodation continues to outstrip what developers are able to bring forward, even as the wider commercial property market navigates higher borrowing costs and cautious investor sentiment.

For UK property investors, this matters because industrial and logistics remains the standout performing asset class of the post-pandemic era, and pockets of full occupancy like Hedon are a proxy for rental growth potential. National vacancy rates for prime industrial stock have hovered between 4 and 6 per cent over the past two years, according to data tracked by agents including Savills and Knight Frank, against a long-run average closer to 8 per cent. That structural undersupply has pushed prime rents up by anywhere between 5 and 9 per cent annually in key regional markets, even as offices and much of retail have struggled to attract comparable capital. A fully let scheme in a secondary location such as Hedon, rather than a headline logistics corridor, suggests the squeeze is not confined to the golden triangle around Northampton, Leicester and Milton Keynes — it is now a feature of provincial England too.

The Yorkshire and Humber angle is particularly instructive. Hull and the East Riding have spent the past decade attempting to reposition themselves around renewable energy manufacturing, port logistics and advanced engineering, and schemes like OYO Business Park are part of the physical infrastructure underpinning that shift. Compare this with Leeds, where take-up of industrial space in 2023 outstripped new supply for the third consecutive year, or Manchester, where prime rents for logistics units have pushed past £9 per square foot in some submarkets. Newcastle and the wider North East have seen similar dynamics, with occupiers increasingly willing to accept smaller, less centrally located units simply because nothing larger or better connected is available. Birmingham and the wider West Midlands, meanwhile, continue to benefit from HS2-adjacent infrastructure spending, even amid delays and cost overruns on the project itself, keeping industrial land values elevated.

For commercial investors and developers, the message is unambiguous: industrial remains the asset class to prioritise, but the returns are increasingly found in secondary and tertiary locations rather than only in established hubs. Institutional capital that once concentrated purely on the M1 and M6 corridors is now underwriting schemes in East Yorkshire, County Durham and South Wales, chasing yields that remain 50 to 100 basis points higher than comparable assets in the golden triangle. Developers who can navigate planning constraints and rising construction costs — build cost inflation for industrial sheds has moderated from its 2022 peak but remains above 4 per cent annually — stand to benefit disproportionately, provided they can secure sites with good road access and grid capacity for occupiers with growing power demands from automation and EV fleets.

The implications extend beyond pure-play industrial specialists. Buy-to-let landlords and residential investors should note that employment growth tied to logistics and manufacturing expansion tends to feed through into local housing demand within 12 to 18 months, particularly in commuter towns surrounding schemes like OYO Business Park. First-time buyers in areas adjacent to major industrial lettings often benefit from job creation that supports mortgage affordability, even as house price growth in those same areas can accelerate faster than wage growth, creating fresh affordability pressures. Surrey and the wider South East, by contrast, illustrate a different dynamic: industrial land is scarcer and more expensive, meaning full-occupancy announcements there typically signal capital appreciation rather than the job-creation story more evident in Yorkshire and the North East.

Looking ahead to the next six to twelve months, expect industrial rental growth to remain resilient even if broader commercial property values stay flat or drift lower under the weight of higher-for-longer interest rates. The Bank of England's rate trajectory will matter less for industrial occupiers, who are driven by operational necessity rather than speculative expansion, than for the investors financing new development. Schemes that reach full occupancy quickly, as OYO Business Park has done, will increasingly command premium pricing when they eventually trade, offering a template that other regional developers are likely to replicate across the North and Midlands through 2025.