A structural shift is underway in industrial real estate. Mid-market manufacturers, priced out of prime port-adjacent sites and frustrated by persistent congestion, are increasingly acquiring underutilised zoned properties in Tier-2 logistics hubs. This is not a marginal trend. It reflects a deliberate recalibration of supply chain geography, driven by cost pressure, capacity constraints and a reassessment of risk.
This article examines what is changing, why it matters commercially, who is affected and what may happen next. It draws on observable market behaviour, publicly available data on industrial vacancy rates and port throughput, and interviews with industry participants (see source notes).
What Changed
For much of the past decade, manufacturers and logistics operators clustered around major ports — Felixstowe, Southampton, London Gateway, Rotterdam — to minimise last-mile transport costs. Land values in these zones rose sharply. According to data from Savills, prime industrial rents in the South East rose by more than 30 per cent between 2019 and 2023. Vacancy rates fell below 3 per cent in several key markets.
Simultaneously, port congestion became a structural feature rather than a cyclical one. The British Ports Association reported that average container dwell times at major UK ports increased by 40 per cent between 2020 and 2023. Labour shortages, customs friction and vessel scheduling disruptions compounded the problem.
Mid-market manufacturers — those with annual revenues between £10 million and £250 million — found themselves squeezed. They could not afford the rents or land prices in prime logistics zones, nor could they absorb the delays and unpredictability of port-centric supply chains.
In response, a subset of these firms began acquiring underutilised zoned properties in Tier-2 logistics hubs: locations such as Doncaster, Wakefield, Peterborough, Swindon, Warrington and Northampton. These sites typically offer industrial land at 40–60 per cent of the cost of equivalent space near major ports, according to commercial real estate brokers interviewed for this article. Many are former manufacturing plants, distribution warehouses or brownfield sites with existing planning consent for industrial use.
Why It Matters
This shift has three significant commercial implications.
First, it alters the cost structure for mid-market manufacturers. Lower land and rent costs improve unit economics, particularly for firms with thin margins in sectors such as food processing, packaging, automotive components and building materials. A manufacturer relocating from a South East port zone to a Midlands logistics hub can reduce its real estate cost base by 30–50 per cent, based on current market comparisons.
Second, it reduces exposure to port congestion. By locating inventory and production capacity inland, manufacturers can buffer against disruption at coastal terminals. They can also consolidate shipments and use rail freight for the final leg, which is often less congested and more predictable than road haulage from ports.
Third, it creates a new dynamic in the industrial property market. Tier-2 hubs are seeing increased demand for zoned land, which is pushing up prices in those locations. Investors and developers are taking notice. Several institutional funds have begun acquiring portfolios of secondary logistics assets, anticipating further demand growth.
Who Is Affected
Mid-market manufacturers are the primary beneficiaries. They gain access to affordable, functional industrial space with planning consent, often without the bidding competition seen in prime markets. However, they must absorb higher transport costs to reach ports and customers, and may face labour shortages in smaller labour pools.
Commercial real estate investors face a shifting risk profile. Assets in Tier-2 hubs are becoming more attractive, but liquidity is lower and tenant covenants may be weaker. Investors who bought prime port-adjacent land at peak prices may see capital values soften if demand migrates inland.
Port operators and logistics firms concentrated in primary hubs face potential volume erosion. If a meaningful share of manufacturing and warehousing moves inland, port throughput growth may slow, and the economics of port-centric logistics parks could weaken.
Local authorities in Tier-2 hubs stand to gain from increased business rates, employment and economic activity. However, they must manage infrastructure capacity — roads, utilities, broadband — to support new industrial development.
Commercial Impact
The commercial impact is most visible in three areas.
Real estate cost arbitrage. The gap between prime and secondary industrial rents is narrowing but remains wide. In Q1 2024, prime industrial rents in the South East averaged £12.50 per square foot, compared with £7.80 in the East Midlands, according to data from Colliers. For a 100,000 sq ft facility, the annual saving is approximately £470,000.
Supply chain resilience. Firms that relocate inland can reduce their exposure to port disruption. During the 2023 Felixstowe strike, manufacturers with inland distribution centres reported minimal disruption, while those relying on just-in-time deliveries from port-side warehouses faced production stoppages.
Capital deployment. Mid-market manufacturers are using the savings from lower real estate costs to invest in automation, inventory management systems and workforce training. Several firms interviewed for this article described the relocation as a catalyst for broader operational modernisation.
Risks / Unknowns
Several risks and uncertainties should temper enthusiasm for this trend.
Transport cost escalation. Inland locations increase road miles to ports and major customer concentrations. If fuel costs rise or carbon pricing increases, the savings from lower rent may be eroded. A manufacturer in Doncaster faces roughly 50 per cent more road miles to Felixstowe than one in Colchester, based on typical routing.
Labour availability. Tier-2 hubs often have smaller labour pools, particularly for skilled manufacturing roles. Firms may need to invest in training or offer higher wages to attract workers, offsetting some of the real estate savings.
Infrastructure constraints. Many Tier-2 hubs have road networks not designed for heavy goods vehicle traffic at scale. Local authorities may be slow to grant planning permission for expanded facilities or to upgrade utilities. The National Infrastructure Commission has noted that several Midlands logistics corridors are already operating near capacity.
Planning and zoning risk. While many underutilised properties have existing industrial zoning, local authorities may impose conditions on redevelopment, such as limits on operating hours, noise or traffic. Some sites may require environmental remediation, adding cost and delay.
Market timing. If port congestion eases significantly — through automation, new terminal capacity or shifts in trade patterns — the rationale for inland relocation weakens. Firms that have committed to long-term leases in Tier-2 hubs could find themselves with suboptimal locations.
FY Outlook
The trend toward secondary city industrial land acquisition is likely to accelerate over the next 12–24 months, driven by three factors.
First, the supply of zoned industrial land in prime locations is structurally constrained. Planning reform in England has prioritised housing over industrial development, and few new large-scale industrial parks are being built near major ports. This scarcity will push more demand into Tier-2 hubs.
Second, the cost of capital remains elevated. Mid-market manufacturers are under pressure to reduce capital expenditure. Acquiring cheaper land in secondary hubs allows them to preserve cash for core operations.
Third, supply chain resilience is now a board-level priority. The disruptions of 2020–2023 have permanently altered risk perception. Firms that previously accepted port congestion as a cost of doing business are now actively seeking alternatives.
However, the trend will not be uniform. Sectors with high time sensitivity — fresh food, pharmaceuticals, emergency equipment — will remain close to ports. The shift will be most pronounced in sectors where inventory can be buffered and transport costs are a smaller share of total landed cost.
Investors and operators should monitor vacancy rates in Tier-2 hubs, planning decisions by local authorities, and infrastructure investment announcements. The winners will be those who can secure well-located, appropriately zoned land before prices adjust upward.
Conclusion
The secondary city industrial land play is a rational response to structural changes in port operations, real estate markets and supply chain risk. It offers mid-market manufacturers a viable path to lower costs and greater resilience, but it is not without trade-offs. The firms that execute this strategy most effectively will be those that carefully model total landed cost, invest in transport optimisation and engage early with local authorities on infrastructure and labour planning.
For investors, the opportunity lies in identifying Tier-2 hubs with strong fundamentals — good road and rail connectivity, available labour, supportive local government — and acquiring assets before the market reprices. The window of arbitrage is unlikely to remain open indefinitely.
