Warehouse and Logistics Development Finance in 2026
Building a warehouse or a logistics shed is a very different funding job from buying one that is already let. With an investment loan, a lender looks at a finished building, a tenant and a rent, and lends against income that is already arriving. With a development loan, none of that exists yet. The lender is funding a building site, a programme and a forecast, and the money goes in by stages as the scheme is built. That changes how much you can borrow, how the interest is charged and, above all, what the lender wants to see at the end.
We arrange finance for ground-up logistics and industrial schemes, and for major refurbishment or extension of existing units, so this guide sets out how warehouse development finance is actually sized and priced in 2026. As a broker working across the whole of the market, we look at every scheme as a piece of commercial property in its own right, and we match the business behind it to the lenders most likely to back it. The wider backdrop matters here too. The speculative pipeline has thinned out sharply, and less new supply tends to support rents and values on the buildings that do complete. That is part of the reason lenders are still willing to fund new industrial space, but only on schemes that stack up against both cost and a credible exit.
This guide sits alongside our other warehouse property finance resources. If you are buying a standing asset rather than building one, see our note on warehouse purchase and investment finance. If you need to move quickly on a site or unlock a development, our warehouse bridging finance, the bridge to develop route, is the usual answer. When a finished scheme needs to be carried through to a long-term home, that is the job of warehouse refinance and stabilisation loans, the term exit. And where a portfolio of tenanted units is involved, multi-let industrial and portfolio finance covers the structuring. Today we focus on the build itself.
What development finance covers
Development finance pays for the work of getting a building out of the ground and into a lettable or saleable state. On a warehouse or logistics scheme, that usually means a single facility that funds the land or site purchase where it is not already owned, the construction itself, professional fees, and the finance costs that build up while the work is going on. It is a short-term, project-length facility rather than a long-term mortgage. The expectation is that it gets repaid in a year or two, once the scheme is finished and the exit is in place.
It is not only for bare-site, ground-up schemes. A lot of the activity we see is heavy refurbishment, extension and repositioning of existing industrial stock: extending a unit, adding mezzanine floors or yard, raising the eaves, or upgrading a tired building so it can be let again. Energy retrofit is an increasingly common reason to borrow, because minimum energy efficiency standards are tightening and a lot of older stock will need work to stay lettable. Knight Frank notes that around 82% of UK warehouse stock built before 2000 does not meet the minimum EPC requirement, with only about 6% of stock upgraded in the past five years, which points to a large backlog of buildings that will need capital spent on them. Whether the job is new build or a major upgrade, the structure is broadly the same: staged funding, interest that rolls up, and a defined exit. The types of work development finance reaches are wider than most owners assume, but a clean commercial property scheme with a clear use is always the easier ask.
Development finance is project capital, not working capital. It funds the build, not the day-to-day running of a business, and the rolled interest is treated as part of total scheme cost rather than an operating expense. Corporation tax relief on finance costs is a question for your accountant, not something a lender prices in, but it is worth raising early because it can change the real cost of the scheme. We can talk you through where development debt ends and where other facilities begin.
A point worth being plain about: development debt is sized against both what the scheme costs to build and what it will be worth let, but the exit is the real test. A lender can be comfortable with the build and still decline if the way out is weak.
Loan to cost and loan to GDV
Two ratios sit at the centre of every development appraisal, and a warehouse scheme is tested against both at the same time. The lower of the two answers is usually what caps the loan.
Loan to cost, or LTC, measures the loan against the total cost of delivering the scheme: land or site, construction, fees and finance costs. In the current market we typically see senior development debt at around 60% to 70% of total cost. That share is an indicative band, and where a particular scheme lands inside it depends on the strength of the borrower, the contractor, the build programme and the exit.
Loan to gross development value, or loan to GDV, measures the loan against what the finished, let building is expected to be worth: the gross development value. On industrial and logistics schemes we generally see this capped at up to around 60% to 65% of GDV. The GDV itself is not a number you choose. It comes from a RICS valuation, and for a let industrial asset that valuation is income-based, capitalising the rent at a yield. With prime UK distribution yields around 5.0% at December 2025 per Knight Frank, and prime logistics yields broadly unchanged over the year to end 2025 per JLL, the end value rests heavily on the rent the building can command and the strength of the tenant behind it.
Loan to GDV is the development cousin of the loan to value test a lender runs on a finished, income-producing building. On standing commercial real estate, loan to value compares the debt to the current market value of the asset. On a development scheme that asset does not exist yet, so the lender works to gross development value instead, then drops back to a stabilised loan to value once the building is let and refinanced. Keeping both ratios in view from the start helps you size the equity correctly.
Because both tests apply, the appraisal has to clear the cost hurdle and the value hurdle together. A scheme that looks cheap to build can still be constrained by a modest GDV, and an ambitious end value will not help if the build cost runs high. The equity you need to put in is whatever is left once the lower of the two limits is applied, so on most warehouse schemes the borrower is funding a meaningful slice of cost from their own resources.
Pre-lets, spec build and the exit
How a scheme is let, or not let, before completion is the single biggest factor in the terms on offer. There are two broad routes, and lenders treat them very differently.
A pre-let, sometimes called build-to-suit, means a tenant has already committed to take the building, usually on a lease agreed before or during construction. From a lender’s point of view this removes most of the letting risk. The end income is contracted, the GDV is easier to stand behind, and the exit, whether a refinance onto investment debt or a sale, is far more predictable. Pre-let schemes generally attract higher leverage and a keener rate, because the lender is funding a building that already has a home. Savills reported that build-to-suit accounted for about 28% of space transacted, up from 20% in the prior year, so a meaningful share of new development is being delivered against a tenant from the outset.
A speculative build, or spec build, is the opposite. You construct the unit without a tenant in place, betting that you will let it at or after completion. The economics can be stronger if the letting goes well, but the lender is carrying letting risk all the way through, so leverage is usually lower and pricing higher. The exit on a spec scheme is also a two-stage problem: finish the building, then let it, before any investment refinance or sale can happen. This is where a stabilisation loan can bridge the gap, carrying a finished but part-let or vacant unit through to a stabilised refinance once the income is in place.
The supply picture is what makes 2026 interesting for spec developers. Speculative space under construction has fallen to around 7.6m sq ft, the lowest level since the third quarter of 2020 and down roughly 65% from the 2022 peak, according to Savills. Annual completions came in at around 16m sq ft, the lowest total since 2018, per Knight Frank. Less new supply tends to support rents and values on the space that does complete, which is a real point in favour of well-located spec schemes. At the same time, Savills noted that around 33% of space transacted involved new speculative development, more than double the prior year’s share, so the appetite to take new spec space is there. A lender will still want to see why your specific unit, in its specific location, will let.
Drawdowns and rolled interest
Development money does not arrive in one lump. It is released in stages, called drawdowns, against verified progress on site. A typical pattern funds the land or site at the outset, then releases construction funds in tranches as the build hits agreed milestones, usually signed off by a monitoring surveyor acting for the lender. You only draw what you need when you need it, which keeps the borrowing efficient and ties the lender’s exposure to real progress.
Interest is handled differently from a normal loan too. On most warehouse development facilities the interest is rolled up, meaning it is added to the loan balance over the build rather than paid monthly out of your pocket. There is no rent coming in during construction, so there is nothing to service the interest from, and rolling it up keeps cash free for the project. The trade-off is that rolled interest is itself part of total cost, so it eats into the LTC and LTGDV headroom. A longer programme means more rolled interest, which means a bigger loan against the same end value. That is one reason lenders pay close attention to the build timetable and the contingency. Overruns cost money on two fronts: the extra build cost, and the extra finance cost stacked on top.
All of this gets repaid in one go at the exit. When the scheme completes and either lets and refinances onto investment debt, or sells, the development facility, including the rolled-up interest, is cleared in full. The cleaner and more certain that exit, the more comfortable a lender is funding the build in the first place.
Pricing and leverage in 2026
Pricing on warehouse development finance is a function of risk, and in 2026 it sits against a Bank of England base rate of 3.75%, held since the December 2025 cut. Term and investment debt in the sector is quoted as a margin over base rate or a reference rate such as SONIA, and the held base rate is the anchor for current pricing. Development debt is priced higher than stabilised investment debt, because the lender is funding a project rather than an income, and the all-in cost reflects the build risk, the letting risk and the length of the programme. Interest rates on development facilities therefore sit above the rates you would see on a let, refinanced unit, and above the rates on a short bridging loan secured on a standing asset, because the build adds risk that a finished building does not carry. Where a scheme needs a short bridge to get going, our warehouse bridging finance can sit in front of the development facility, and the two are priced separately.
On leverage, the indicative bands we work with are senior development debt at around 60% to 70% of total cost and up to around 60% to 65% of GDV, with interest usually rolled up over the build and repaid on exit. Where mezzanine is used to top up the senior loan and reduce the equity cheque, it sits behind the senior lender and is priced accordingly, broadly around 11% to 18% per year. Mezzanine adds leverage but also adds cost and complexity, so it tends to appear on larger schemes where the extra debt is worth the price.
Three broad camps fund this market, and we would not name individual lenders. Specialist property lenders have the deepest appetite for development and transitional risk and tend to lead on spec and ground-up schemes. Challenger banks compete harder on stabilised, well-let stock and on pre-lets with a strong covenant. High-street banks are the most conservative, favouring prime assets, strong covenants and lower leverage. Which camp fits a given scheme depends on the leverage you need, the letting position and how the exit looks.
What lifts terms in practice is straightforward: a pre-let or strong letting evidence, a credible and well-costed build with realistic contingency, an experienced developer and contractor, a good location with genuine occupier demand, and a clean exit. The thinning supply pipeline helps the value side of the equation, but it does not replace the need for a scheme that works against both cost and end value.
Frequently asked questions
How much deposit or equity do I need for a warehouse development?
It depends on the lower of the two main limits. With senior debt around 60% to 70% of cost and up to around 60% to 65% of GDV, the equity is whatever is left once the binding limit is applied. On most schemes that is a meaningful share of total cost, and a stronger pre-let or exit can reduce it. Mezzanine can lift overall leverage but adds cost.
Can I get development finance for a speculative warehouse with no tenant?
Yes, spec development is fundable, particularly given how thin the new-supply pipeline has become. Speculative space under construction is around 7.6m sq ft, the lowest since the third quarter of 2020 per Savills, which supports values on new completions. Expect lower leverage and higher pricing than a pre-let, and a clear story on why your unit will let.
Do I pay interest monthly during the build?
Usually not. On most warehouse development facilities the interest is rolled up and added to the loan, then repaid at exit. That keeps cash free during construction, but the rolled interest counts as part of total cost, so it reduces your loan-to-cost and loan-to-GDV headroom.
What counts as a credible exit?
Either a refinance of the finished, let building onto longer-term investment debt, or a sale. The stronger the contracted income behind the building, the more certain the exit, and a stabilisation loan can bridge a finished but part-let unit through to a stabilised refinance.
Does development finance cover refurbishment and energy retrofit?
Yes. Major refurbishment, extension and repositioning, including EPC and energy upgrades, can be funded on a development basis, then refinanced once the building is compliant and let. With around 82% of pre-2000 stock below the minimum EPC requirement per Knight Frank, retrofit is a growing reason to borrow.
Talk to us
If you are planning a ground-up logistics scheme, a build-to-suit unit or a major warehouse refurbishment, we can help you structure the funding and weigh up the routes. As your broker, we build each finance case around the scheme in front of us, then take it to the lenders most likely to fund it. We arrange warehouse and logistics development finance across the specialist property lenders, challenger banks and high-street banks that fund this market, and we will be straight with you about what each scheme can support against both cost and end value. Bringing us in early gives you access to a wider range of lenders and a clearer read on what terms are realistic before you commit.
To get started, talk to a development finance specialist about your site and your timeline. Speak to us about the build, the units you plan to deliver and how you expect to exit, and we will tell you what is fundable. When you are ready to apply, we will package the case and run it for you.
All figures in this article are indicative market commentary for UK warehouse and industrial property in 2026, not quotes or offers, and actual terms are set case by case by individual lenders. This is general information, not regulated financial advice. Commercial and trading finance on warehouse and industrial property is unregulated business lending, and we are not authorised by the Financial Conduct Authority. Where a deal involves a regulated element, we refer it to an appropriately regulated firm. Take professional advice for your own situation.