Retail investment slowly building momentum

Retail investment activity in Europe held firm in the third quarter, with preliminary figures suggesting that more €6.5 billion was channelled into retail assets. This is broadly in line with the same quarter last year. Year-to-date volumes have now surpassed €24.6 billion, 16% higher than in the same period of 2024 and 3% above the five-year average for Q1–Q3. This resilience stands in contrast to the wider real estate market, where total European investment is expected to reach €127.5 billion by the end of Q3, slightly down on last year (-1%) and 29% below the five-year average.

This retail resurgence is slowly spreading across Europe, as most markets have recorded annual increases in retail investment, with standout growth in Belgium (+241%), the Netherlands (+180%), Denmark (+135%), Portugal (+128%) and Finland (+114%), generally on the back of relatively weak performance recorded last year. Only Poland, the UK and Germany saw volumes fall compared with last year. The fundamentals of the retail market are clearly improving, drawing a wider range of investors back into the sector. Falling vacancy rates, renewed rental growth, and a very limited pipeline of new developments are all strengthening income prospects. This more supportive environment is encouraging larger assets and portfolio transactions to come to market, which in turn is broadening participation from institutional and international buyers.

Shopping centres have continued to regain popularity, with investment in the sector accounting for 30% of total retail volumes since the beginning of the year, up from 26% over the same period in 2024. This increase was largely driven by a rise in the number of larger transactions. High street investment, by contrast, fell sharply to just 1% of total activity, compared with 17% last year, when a handful of trophy asset deals had inflated volumes. Retail parks remain the leading segment, representing 42% of total retail investment so far this year. Their resilient fundamentals continue to appeal to investors, although the share has dipped compared to last year. This is less a reflection of a weaker appetite and more the result of a limited pool of available stock. Meanwhile, grocery stores maintained their role as a steady, defensive allocation, accounting for 16% of total investment, broadly in line with 2024.

The retail market is becoming increasingly polarised. Prime assets in central, high-footfall locations with secure tenant demand continue to command strong investor interest, underpinned by their income stability and long-term value. By contrast, secondary properties face greater leasing pressures and heightened risk of obsolescence, yet still attract buyers pursuing value-add strategies. These often involve repositioning, modernising facilities, enhancing sustainability features, or repurposing assets for alternative uses. The focus of investment is therefore shifting: the distinction between shopping centres, retail parks, or grocery formats is less important than the intrinsic quality, resilience, and adaptability of each asset.

Looking ahead, the challenge will lie in narrowing the gap between buyer and seller expectations. As more stock comes to market and the investor base widens, pricing alignment will remain a hurdle, slowing the pace of deal activity. We expect a gradual increase in transactions rather than a sharp rebound, supported by growing confidence in the retail sector and a more favourable economic backdrop. Based on closed deals since early October and those progressing through the pipeline, retail investment volumes in Q4 are projected at around €11 billion. This would bring the 2025 total to just over €35.5 billion, marking a 5% year-on-year increase, and 4% above the five-year average.

Yields stability, giving way to compression

While some investors continue to seek higher-yielding opportunities in alternative sectors, prime retail assets still offer a comparatively attractive pricing advantage against most other property types. This relative value has contributed to a renewed, albeit cautious, appetite for retail investment. Despite this regained interest, prime retail yields across Europe have remained broadly stable since the start of the year. In our view, this resilience reflects two main factors. First, investors are not yet ready to price in yield compression, as structural concerns around the sector persist and financing costs remain elevated. Second, a significant share of recent activity has been in the form of portfolio transactions, which do not necessarily translate into sharper benchmarks for prime assets. As a result, there is not yet the breadth of competitive bidding required to generate yield movement.

However, year on year, European retail yields showed moderate inward movement across all segments. In Q3 2025, luxury high street assets recorded the largest shift, with prime yields decreasing by 17 bps year-on-year to reach 4.2%. Mass-market high street yields also moved in by 7 bps to 5%, shopping centre by 4.5 bps to 6.2% and retail park yields decreased by nearly 4 bps over the year to 5.9%.

Looking ahead, improving economic conditions and a stronger retail occupational market are expected to sustain investor appetite. Yield compression should remain gradual across Europe next year, with retail warehouses and high-street assets leading the way thanks to resilient tenant demand. Prime shopping centres are also set to benefit from growing institutional interest in large lot sizes, which should support liquidity and drive a slow but steady compression of yields in this segment.

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