Logistics
20 May 2026The pre-let premium in logistics forward funding
A mid-2026 read on how a pre-let repriced against speculative delivery in big box logistics forward funding, and why covenant and lease indexation are doing more of the work than location alone.
Data basisMarket observation and public transaction commentary, mid-2026. Yield figures are indicative ranges, not a valuation.
Big box logistics has been through a full cycle in three years, from yield compression to sharp correction and now to a more discriminating market. Mid-2026 pricing shows a widening gap between pre-let and speculative schemes, and a market that is rewarding covenant and lease structure more than it is rewarding location alone. This note quantifies the pre-let premium and explains what sits behind it.
The pre-let premium has widened
The yield gap between a pre-let and an otherwise identical speculative big box scheme has widened as investors have grown more cautious on letting risk. A pre-let to a strong occupier on a long, index-linked lease is pricing meaningfully inside a speculative equivalent.
| Letting position | Indicative net initial yield (Q2 2026) |
|---|---|
| Pre-let, strong covenant, long index-linked lease | 5.00% to 5.50% |
| Pre-let, weaker covenant or shorter term | 5.50% to 6.00% |
| Speculative, prime location | 5.75% to 6.50% |
The spread is not constant; it widens when occupier demand softens and narrows when confidence returns. In the current market the premium for a contracted income is at the higher end of its recent range.
Covenant and indexation are doing the work
Investors are pricing the strength of the covenant and the quality of the lease indexation more than the physical building, and this is a shift from the pre-correction market. A prime shed in a prime location no longer prices keenly on its own; the income attached to it has to be strong and long.
Leases with fixed or capped-and-collared index-linked uplifts to a strong occupier are attracting the sharpest pricing, because they give the investor the inflation protection and income certainty that the current environment prizes. Open-market review structures and weaker covenants price wider, even on excellent buildings.
Specification is now a gating factor
EPC A ratings, strong BREEAM performance and genuine power capacity have moved from desirable to close to essential for institutional funding. Investors are increasingly unwilling to fund buildings that carry obsolescence risk on energy performance, both for their own ESG mandates and because they see it in the exit.
The practical consequence for developers is that the specification decisions taken at design stage now materially affect fundability, not just marketability. A building that cannot reach the top energy and sustainability standards is competing for a shrinking pool of capital.
What this means for developers
For developers with logistics schemes, the route to the keenest forward funding runs through a strong pre-let, a long index-linked lease and a top-specification building. Speculative delivery remains fundable in the strongest locations, but it prices for the risk. The big box logistics pillar sets out the full picture, and the pre-let structures guide covers how the letting is documented. To test a scheme against current pricing, get in touch.