Consumer resilience remains strong, key performance indicators are steadily improving, and investment momentum is projected to continue into 2026.
Macroeconomic pressure of retail and leisure
The UK retail and leisure markets continue to face a challenging and fast-evolving environment, shaped by economic pressures, policy changes, and shifting consumer behaviours. A number of macroeconomic factors are influencing both the fortunes of operators and the spending power of consumers. Inflation remains persistently above the Bank of England’s (BoE) 2.0% target, with CPI reaching 3.4% in December 2025, up from 3.2% the previous month, while CPIH rose to 3.6%. Although inflation has eased from its peak, it remains “sticky”, exerting continuing pressure on household budgets.
Against this backdrop, the BoE reduced interest rates four times during 2025, bringing the base rate down to 3.75% in December. These cuts reflect the Bank’s increasing concern that the UK economy was losing momentum, and that maintaining rates at previous levels risked tipping the country into recession. Despite lower borrowing costs, consumer confidence continues to fluctuate, reacting quickly to movements in inflation, interest rate decisions, and speculation over fiscal policy direction.
Short-term improvement in consumer confidence despite longer-term fragility; resilience over optimism
December 2025 brought a modest improvement in sentiment, with the overall GfK Consumer Confidence Index rising two points to -17, driven largely by improved views around major purchases — an unsurprising trend heading into the festive season. Yet these short-term uplifts mask deeper underlying uncertainty. January 2026 marks ten years since UK consumer confidence was last in positive territory. Although the headline index gained one point this month to -16, consumers remain far from optimistic about the broader economic landscape. Personal finance indicators have strengthened — reflected in the +6 reading for expected personal finances over the next 12 months — but confidence in the general economic situation has deteriorated, continuing a familiar pattern seen during previous periods of political and economic instability.
Many feel increasingly confident in their ability to manage their own personal budgets, yet remain sceptical about the wider economic outlook
Sam Arrowsmith, Director, Commercial Research
This divergence suggests consumers are demonstrating resilience rather than genuine optimism. Many feel increasingly confident in their ability to manage their own personal budgets, yet remain sceptical about the wider economic outlook. In practice, this creates a behavioural split: cautious, value-driven everyday spending, paired with selective, occasional discretionary purchases when confidence temporarily lifts.
Retail sales performance is stronger than expected
Despite economic headwinds, full-year retail sales figures from the ONS reveal surprising strength. Retail sales values grew by 3.4% year-on-year (YoY) in 2025 (on a rolling 12-month basis), while volumes increased by 1.8% — outperforming estimated GDP growth of around 1.4–1.5%. Both grocery and non-food categories saw positive growth. Grocery values rose 3.8%, with volumes returning to positive territory for the first time since 2021, increasing by 0.4% YoY. Non-food performed even more strongly, with values up 2.9% and volumes up 2.6%, driven especially by discretionary categories including books, furniture, and jewellery. Online spending also rose by 4.3%, with multichannel retailers outperforming pure-play operators.
Shifts in spending patterns; trading down and selective indulgence
Barclaycard’s 2025 spend data provides important context for understanding why consumer behaviour appears out of step with elements of the wider economic narrative. Essential spending fell by 1.5% over the year, with transactions down 2.2%, indicating that households are actively managing budgets by making fewer supermarket trips, trading down, and cutting impulsive purchases. In contrast, non-essential spending rose by 1.5%, driven by categories linked to wellbeing and selective indulgence. Health and beauty spending was particularly strong at +9.8%, while clothing transactions increased by 3.4% despite only modest value growth — evidence of more frequent, lower-value purchases in areas where consumers still feel comfortable treating themselves.
Home-related categories also illustrate mixed patterns. Grocery spending declined slightly by -0.4%, yet furniture sales grew by 4.9%, aligning with GfK data showing consumers feel increasingly positive about their personal financial prospects in the year ahead — even as caution remains embedded in everyday spending habits.
Within grocery, behaviour is especially nuanced. Barclaycard reports that grocery transactions fell by -1.1% in 2025 and spend values declined by -0.4%. Meanwhile, ONS data shows grocery volumes rising marginally by +0.4% — the first positive movement since 2021. Although these datasets appear contradictory at first glance, the changes are marginal in both directions and ultimately point to the same behaviour; consumers are buying slightly more per shop while visiting supermarkets less often.
This is characteristic of trading-down strategies. Households consolidate trips, reduce top-up shopping, lean more heavily on value ranges, promotions and bulk-buying, and stretch budgets further by avoiding higher-priced branded products. What is particularly notable is that this ‘squeeze-and-save’ behaviour in essential categories is simultaneously enabling spending at the opposite end of the spectrum. By tightening their approach to everyday grocery shopping, consumers free up discretionary headroom to spend on “little luxuries” or infrequent premium treats — reflected in strong performance across categories such as health and beauty, selective apparel, and small indulgence-driven purchases.
Taken together, these trends help explain why essential spend values declined overall despite easing inflation. Households are working harder than ever to manage routine costs, while reallocating savings from trading down into intentional, feel-good categories. The grocery sector, in particular, illustrates how trading-down behaviours are now firmly embedded and how they are indirectly fuelling pockets of discretionary growth elsewhere in the retail landscape.
Inflation-led growth in leisure and F&B
Barclaycard data on leisure and F&B for the whole of 2025 paints another complex picture; it has seen sales growth in all subcategories — however, transactions across all of these sub-sectors have fallen (figure 2).
This suggests growth was driven more by inflation than by increased activity. Rising operating costs — including wages, energy, business rates, and food inputs — continue to push prices upward across hospitality venues.
Policy and taxation headwinds
Policy changes are set to introduce further pressures. The UK government’s business rates reform, announced by Chancellor Rachel Reeves, represents one of the most significant changes to commercial property taxation in recent years. From April 2026, large commercial properties with a rateable value above £500,000 will face a surcharge of up to 20%, adding an estimated £600m to the tax bill of major retail and leisure operators.
Meanwhile, smaller occupied retail, hospitality, and leisure properties with rateable values under £51,000 will benefit from up to 40% relief funded by this surcharge. However, the transition year for 2025–26 brings a reduction in relief from 75% to 40%, meaning many operators across the retail and leisure sectors will face higher business rates bills before wider reforms are fully implemented. The government has already issued a U-turn for pubs following industry pressure, signalling the political sensitivity of the changes.
These tax adjustments arrive alongside rising employment costs. The increase in employer National Insurance — from 13.8% to 15% — combined with the uplift of the National Minimum Wage to £12.21 per hour for workers aged 21 and over, significantly raises the cost base for retail and leisure operators, particularly those with labour-intensive models. As a result, operators are now contending with immediate increases in operating overheads alongside a broader, more structural shift in their tax liabilities.
Geopolitical uncertainty and supply chain risks
External geopolitical factors further complicate the operating environment. Renewed tariffs introduced by the US administration, ongoing conflicts in Russia and the Middle East, and heightened exchange rate volatility all pose material risks to UK retail and leisure supply chains. Tariffs raise input costs for goods sourced internationally, while currency fluctuations make procurement and pricing unpredictable. Recent geopolitical tensions — including episodes such as former U.S. President Donald Trump’s proposal to purchase Greenland — underscore how global political ambitions can create uncertainty that filters into even niche areas of international trade and supply chains.
Energy markets also remain vulnerable to geopolitical tensions, with conflict-driven instability continuing to elevate fuel and utility costs. These pressures feed directly into operating margins for retail and leisure operators. As costs continue to rise and uncertainty persists, consumers may increasingly rein in discretionary spending, posing a significant challenge to demand across the wider retail and leisure landscape.
Market restructuring, insolvency and occupier dynamics
Amid this complex economic backdrop, patterns of retailer distress and market restructuring throughout 2025 were more nuanced than headline figures might suggest. While operators continued to face significant pressure from rising employment costs, business rates changes and elevated input inflation, the incidence of large-scale insolvency among national chains remained comparatively limited. Instead, much of the disruption within the market reflected ongoing portfolio optimisation, financial restructuring, and heightened exit activity among independent retailers rather than widespread collapse of major multiples.
The Centre for Retail Research (CRR) illustrates this shift. In 2024, total store closures rose to 13,479, yet just over 7,500 of these were the result of formal insolvency proceedings. This marks a decline in insolvency-led closures compared with the peak years of 2020 and 2022, despite a higher overall volume of store losses driven by rationalisation programmes, rent and rate pressures, and voluntary withdrawals from the independent sector. Although CRR has not yet published the confirmed total for 2025, its forecast of 17,349 closures points to a continuation of the same pattern: more closures overall, but proportionally fewer linked directly to administrations or corporate collapse. In effect, the market is seeing more strategic retreat than systemic failure.
Within the national retail landscape, operators with substantial physical estates — such as River Island, Poundland, New Look and Select — implemented targeted restructurings aimed at exiting unprofitable sites or reducing rental liabilities, rather than withdrawing wholesale from the market. Only three notable brands — Claire’s, The Original Factory Shop (TOFS) and Bodycare — entered administration during the year. Even here, the narrative is more measured than headlines imply. Of the three, only Bodycare ceased trading entirely, and between 30 and 40 stores are expected to reopen under new ownership following acquisition by former Body Shop CEO Charles Denton. Moreover, chains such as Claire’s and TOFS had been displaying underlying structural weaknesses for years, with prolonged underinvestment in store experience, outdated ranges and legacy balance sheet burdens leaving them exposed. Rising costs acted more as a catalyst than a root cause.
The leisure sector mirrored this pattern in early 2026. Revolution Bars Group, facing sustained cost pressure and weaker late-night spending, entered a restructuring plan that resulted in the closure of 21 sites but the rescue and continued operation of 41 others. This reinforces the point that distress through 2025 tended to be focused and selective, rather than indicative of a broad-based collapse across the high street or shopping centre environment.
Vacancy declines highlight underlying market resilience
Crucially, the closures associated with restructurings and administrations among major chains in 2025 represented only around 0.2% of the UK’s total retail stock. This limited footprint helps explain why key occupancy indicators across high streets and shopping centres continued to improve, highlighting continued churn, rather than widespread financial distress in the market. According to Green Street analysis, high street vacancy fell to 13.4% in Q4 2025 and shopping centre vacancy declined to 16.9% — their lowest levels since Q3 2020. This gradual, sustained improvement reflects an underlying momentum in the occupational market; there continues to be marginally more acquisitions than disposals, and demand for the best-located, best-configured space remains firm.
This trend is particularly evident in major cities, dominant regional malls and prime shopping centres, where void levels sit well below national averages. These locations continue to attract expanding operators — especially value retailers, grocery-adjacent occupiers, beauty brands, leisure operators and F&B concepts — highlighting the continued willingness of retailers to secure space in high-performing environments.
At the same time, the UK’s oversupply of retail space is being corrected through active repurposing strategies, with secondary or tertiary locations increasingly being adapted for mixed-use, community uses or convenience-led retail. Many towns no longer need to function as full-service retail destinations; instead, the market is naturally shifting towards formats aligned with local demand patterns, including everyday value, essential shopping and service-based operators.
Footfall stabilisation and tactical consumer behaviour
Footfall trends further reinforce the market's stabilisation. MRI data shows that weekly footfall grew YoY across all three major asset classes throughout the first three quarters of 2025. Although Q4 recorded a modest decline, this was driven more by tactical shopping behaviour than by weakening engagement. Consumers increasingly delayed purchases to take advantage of intensified discounting during Black Friday and the January sales period, a pattern entirely consistent with the broader trend of value-driven decision-making identified in spending data.
In fact, UK retailers have already experienced a notable sales boost in January. Total retail revenues rose by 2.7% YoY for the four weeks to 31 January, slightly ahead of the 2.6% growth recorded in January 2025, according to the latest BRC-KPMG retail sales monitor. Food sales increased by 3.8% YoY, compared with 2.8% growth over the same period last year, while non-food revenues grew by 1.7%, though this was below the 2.5% rise seen last January. In-store non-food sales were up 2% YoY, compared with 2.6% growth in January 2025, and online non-food sales rose by 1.3%, versus 2.2% over the same period last year.
Many shoppers had deliberately held off Christmas spending and waited for January discounts, making the start of the new year the strongest period for growth.
Rental performance and emerging market polarisation
This improving occupancy picture is reflected in rental performance, which continues to show signs of resilience, particularly in prime locations. PMA data indicates that Prime Town Centre Zone A rents across major cities have risen by 7% since mid‑2024, while regional centres and resilient towns have seen around 2% growth. Savills analysis of their open‑market lettings and regears indicates continued positive momentum in the retail leasing market. Average headline rents across high streets and shopping centres increased to £31.09 in 2025, while net effective rents rose to £29.81. These figures represent annual increases of 16.1% and 16.4% respectively compared with 2024, and striking uplifts of 46.7% and 58.9% compared with new lettings completed since the 2020 rental rebasing. Rental growth on new deals remains firmly in positive territory, underpinned by constrained supply in high-quality locations and resilient occupier demand.
Growth in both net effective and headline rents demonstrates that incentives are being squeezed, as landlords rely less on extended rent‑free periods or capital contributions to secure lettings. Instead, the market is increasingly able to sustain stronger headline levels with fewer concessions. This alignment between rising headline and net effective rents reflects an improving landlord position, tightening availability of prime units, and greater confidence among occupiers — especially those seeking well‑located, best‑in‑class accommodation.
However, as the occupational market continues to recalibrate, rental polarisation is becoming increasingly pronounced. Prime assets are strengthening as demand concentrates in the most resilient, high-footfall environments. Conversely, secondary and tertiary locations with elevated vacancy face a more challenging trajectory, requiring proactive repositioning to avoid further rental softening. This divergence mirrors broader disparities in retailer performance and strategic focus, reinforcing the need for landlords and operators to respond dynamically to evolving consumer expectations, cost structures and locational relevance.
Christmas trading reinforces established consumer trends
The Christmas trading period provided an important barometer of retail health and, rather than redefining the trajectory of 2025, it largely reinforced the consumer behaviours and market dynamics observed throughout the year. Despite ongoing economic pressures, the sector delivered a broadly resilient festive performance, with strength concentrated in grocery, value‑led propositions, and operators with well‑established omnichannel models. In many respects, Christmas magnified the structural shifts already shaping trading patterns, highlighting once again that consumer caution does not preclude spending; it simply redirects it.
Despite ongoing economic pressures, the sector delivered a broadly resilient festive performance
Stuart Moncur, Head of National Retail
Grocers and discounters lead festive performance
Performance was strongest among the major grocers and discounters, reflecting the entrenched prioritisation of essential categories and the willingness of consumers to “trade up” selectively on food and premium own‑label products during key moments such as Christmas. Strong results from Lidl, Aldi, Tesco, Sainsbury’s and M&S demonstrated how value, convenience, and quality continued to win out, with growth supported as much by mix, premiumisation and market share gains as by inflation. This pattern closely mirrors the trading‑down and selective indulgence behaviours seen across 2025; households continue to economise on everyday items but remain prepared to invest in categories that carry emotional, seasonal, or experiential significance.
Non-food remains subdued amid value-driven decision making
A clear divergence persisted between food and non‑food, illustrating the caution that remains around discretionary purchasing. While operators such as Next sustained strong momentum, underpinned by its robust omnichannel model, other general merchandise and home categories faced more subdued demand. Retailers with exposure to big‑ticket, discretionary lines — such as Argos and Dunelm — typically saw softer results as consumers deferred higher‑value purchases in favour of more affordable gifting. Even within apparel, performance varied markedly. Athleisure and sportswear softened, as shown by JD Sports’ LFL decline, while value‑driven propositions such as Primark continued to benefit from their ability to combine low pricing with improved product quality and enhanced digital engagement.
Where retailers were already in the midst of operational resets — such as B&M or The Works — Christmas trading tended to expose the fragility of propositions still undergoing change. Weaker availability, value‑perception pressure or fulfilment issues all contributed to less robust performance, emphasising that operators lacking clarity, consistency or operational alignment struggled to convert demand even during the peak period.
Omnichannel integration continues to drive competitive advantage
In contrast, the quarter again highlighted the growing importance of omnichannel capability. Ecommerce volumes accelerated meaningfully, yet the strongest performance came from retailers who successfully integrated digital channels with well‑invested store estates. Tesco’s ability to leverage stores for peak fulfilment, Sainsbury’s strong convenience performance, and Next’s mutually reinforcing store‑and‑online model all demonstrate how physical assets remain central to digital efficiency, last‑mile speed, and customer engagement. The most successful operators were those who treated the store estate not as a cost centre but as a strategic enabler of online growth.
Central to outperformance was not digital alone, but the integration of digital with store infrastructure
Sam Arrowsmith, Director, Commercial Research
Specialist retailers benefit from clear customer missions
At the same time, specialist retailers across categories such as pet care, cookware, electricals and food-to-go continued to show resilience, benefiting from clear customer missions and strong value alignment. ProCook, Jollyes, Greggs, Majestic Wine, Currys and DFS all reported robust trading, reinforcing the importance of defined propositions, targeted ranges and agile operating models. Notably, Majestic Wine’s strongest Christmas in 45 years further supports the premiumisation trend observed elsewhere in food, with consumers continuing to treat themselves in smaller, more intentional ways even as wider caution persists.
Overall, the Christmas trading period capped off 2025 with performance that largely reinforced the year’s prevailing trends
Alan Spencer, Head of UK Retail
Festive trading amplifies, rather than alters, 2025 retail dynamics
Ultimately, the festive period did not alter the structural forces shaping the sector: consumers remained selective, prioritising value, quality and convenience, while retailers operating clear, well‑executed propositions — particularly those with strong omnichannel integration — captured share. The peak trading season affirmed the resilience seen elsewhere in the data; even in an environment characterised by cost sensitivity and economic uncertainty, retail demand remained firmly present, but it skewed decisively towards operators aligned with the needs of a highly value‑conscious market.
For more details on Christmas trading performance, read our UK Retail Christmas Trading 2025 briefing note.
Occupational outlook; flux becomes the familiar
The outlook for the UK high street and shopping centre occupational market in 2026 is cautiously optimistic, underpinned by the gradual recovery in consumer fundamentals, stabilising vacancy rates and a continued, but now familiar, polarisation between prime and secondary locations. High street and shopping centre voids remain at their lowest levels since 2020, reflecting an occupational market where acquisitions are consistently outpacing disposals and where demand for well‑located, high‑performing units remains firm. Despite sustained economic pressures, shifting policy landscapes and ongoing fiscal speculation, retailers have demonstrated a growing resilience in managing a trading environment that has come to be defined by continual change. A state of flux has, in many respects, become the new normal, with operators embedding this volatility into their strategic planning and continuing to invest, refine portfolios and expand where conditions allow — mirroring the adaptability seen in consumers’ own spending strategies.
We expect this tightening to persist through 2026, supporting further rental growth in the strongest locations as retailers compete for limited availability. However, structural polarisation will remain a defining feature of the market. Dominant urban centres and prime regional malls are likely to continue attracting global brands, value retailers and digitally enabled operators, while secondary and tertiary locations — with weaker footfall fundamentals and surplus floorspace — will face ongoing pressure to transition towards alternative uses such as healthcare, leisure, residential and broader community‑focused services.
Analysis from Centre for Cities highlights the extent of the divergence across the UK, with occupational outcomes varying sharply by city depending on catchment affluence, visitor inflows, and the strength of competing retail destinations. Overall, though, the sector enters 2026 on firmer footing: resilient consumer spending in key categories, active expansion plans, particularly among value and grocery‑adjacent operators and improving investor confidence together suggest a stable and gradually strengthening occupational market — albeit one where success is increasingly concentrated in the best‑located, best‑configured and most adaptable assets.
Shopping centres; sentiment shift
The shopping centre investment market has undergone a notable shift over the past two years, marked by periods of strong optimism, unexpected pauses, and renewed momentum. Toward the end of 2024, sentiment was particularly buoyant, with the market poised for a wave of transactional activity. However, this early confidence gave way to a surprising lull in Q1 2025 that deepened into what became the quietest Q2 on record, with only £20m of transactions completed. Despite this slow start, the year ultimately closed on a significantly stronger footing, finishing with £1.5bn of total volume — down 29% on the previous year, but broadly aligned with the wider pattern across all other commercial property sectors, which saw an average decline of c.17%.
In total, more than 14m sq ft of shopping centre floorspace transacted in 2025, representing a 29% reduction from 2024 and equating to a combined capital value of just under £1.5bn. The number of transactions fell to 32, a 35% decrease YoY. However, average lot size rose significantly; with an average capital value of £52.7m per transaction — up 15% on 2024 — compared with long-run averages around £25m. Lot sizes have effectively doubled, signalling a shift in investor focus toward larger, higher-quality assets.
Influence of large-scale, high-profile transactions
In fact, the market was heavily shaped by a small number of large‑scale, high‑profile transactions, with the top six deals alone accounting for 68% of total capital value traded. These comprised some of the most significant UK shopping centre investments of the year: a 50% stake in Birmingham’s Bullring and Grand Central, acquired by Hammerson for £319m as it took full control by purchasing the remaining interest from CCP; Braehead Shopping Centre in Glasgow, sold for £220m to Frasers Group, marking their first major statement acquisition in the UK, sourced from SGS; a 50% stake in Brent Cross, secured by Hammerson for £200m, further consolidating its ownership; The Lexicon, Bracknell, acquired for £145m by Realty Income, marking its entry into the UK shopping centre market through a purchase from Schroders/L&G; a 50% interest in The Oracle, Reading, bought for £104m, with Hammerson acquiring the remaining stake from AIDA; and Festival Place, Basingstoke, purchased for £99.1m by returning investor MDSR, signalling renewed confidence among long‑standing sector participants.
Institutional capital and buyer dominance
Taken together, these deals underscore the central role of institutional capital, which accounted for 56% of total investment volume. Among these, Hammerson was particularly dominant, deploying £623.5m, equivalent to 41.5% of all capital traded, through a series of strategic consolidations across its existing portfolio. This level of activity represented a clear commitment to strengthening control over key assets and reaffirmed Hammerson’s clear statement of strategic intent.
After a mid-year slowdown, transactional activity surged in Q4, supported by improving confidence and strong appetite from investors seeking to place capital before year-end. This resurgence has played a key role in drawing further investors back to the sector, buoyed by improving occupational performance and greater pricing clarity.
Combined impact of occupational strength and competitive debt
One of the most significant developments has been the notable improvement in debt availability. Debt remains the lifeblood of the shopping centre sector, and lenders — having recapitalised and adjusted after earlier market pressures — are now active and increasingly competitive. This renewed liquidity has supported several key sales processes over the last 12 months, including Festival Place in Basingstoke, where lenders offered competitive terms, highlighting a meaningful shift in risk appetite.
Investor confidence has translated into tangible yield compression, particularly at the super-prime and prime ends of the market
Toby Ogilvie Smals, Director, Retail Investment
Taken together, the improvement in occupational performance — characterised by stronger retailer demand, reduced insolvency levels, and rising footfall — and the renewed depth and competitiveness of the debt markets should not be viewed in isolation. It is their combined effect that has been most significant for the sector. The alignment of these two pillars has materially strengthened investor conviction, enabling sharper bidding, broadening the active buyer pool, and ultimately contributing to the modest yield compression now evident across prime and town‑centre‑dominant assets.
Across the top six transactions of the year, debt played a central enabling role. A visible return of institutional and listed REIT buyers has reinforced confidence among lenders, creating a virtuous circle of improved pricing, stronger bids, and enhanced certainty of execution. In several processes, including Festival Place, over 60 lenders were approached, and the depth of response demonstrated the strongest financing appetite seen in years.
Yield movements and pricing trends
Investor confidence has translated into tangible yield compression, particularly at the super-prime and prime ends of the market. Average Net Initial Yields (NIY) compressed from 13.6% in 2024 to 10.99% in 2025. Across super-prime, prime, and town-centre-dominant assets, the average NIY moved only marginally — from 8.74% to 8.67% — reflecting the resilience of best-in-class schemes and renewed investor willingness to price in growth.
Yield compression has been driven by robust occupational performance, strong leasing demand, and increasingly stable trading patterns. As sentiment continues to improve, further hardening is anticipated across top-tier assets as well as in town-centre-dominant schemes. Savills has identified shopping centres as the top-performing retail sub‑sector over the next five years, forecasting an 8.0% income return and 2.5% capital growth — underpinned by income resilience and emerging ERV growth.
Structural reweighting toward larger lot sizes
One of the clearest structural shifts is the pronounced move toward larger lot sizes. Since 2019, only 23 shopping centre transactions above £100m have taken place — but seven occurred in 2024 alone, and a further six in 2025, totalling c.£1.1bn. These 2025 deals represented 27% of all £100m+ transactions recorded since 2019, illustrating a fundamental reweighting toward scale.
Deals under £25m remain the most numerous but have steadily declined as a share of total activity — from around 80% historically to 60% in 2025. These smaller assets represented only £230m of total capital last year, signalling limited value churn but continued appeal to new entrants seeking higher initial yields. By contrast, the £50–£100m range has expanded significantly, now accounting for around 20% of deals — a sweet spot for buyers seeking available debt and manageable risk.
Institutional and listed REITs continued to dominate buyer activity, while the presence of new entrants diminished significantly. In 2025, only 16% of acquisitions — just five of the 32 schemes traded — were secured by first‑time shopping centre investors, a sharp decline from the approximately 25% recorded between 2022 and 2024.
Hammerson remained the most active institutional buyer, pursuing an assertive consolidation strategy by increasing its ownership stakes in three major schemes and deploying more than £620m over the year. Realty Income, a long‑established leader in the retail warehousing sector, made its first move into UK shopping centres with the acquisition of The Lexicon in Bracknell, and early indications suggest this marks the beginning of a broader expansion into the sector. Frasers likewise sustained their rapid growth trajectory, having acquired nine schemes since entering the market in 2023; in 2025, their investment strategy shifted decisively toward larger lot sizes, exemplified by their acquisition of Braehead, with all signs pointing to continued aggressive investment. Meanwhile, Unibail‑Rodamco‑Westfield re‑entered the UK shopping centre market through the purchase of a 25% stake in Edinburgh’s St James Quarter, aligning with its strategy of deepening its presence in key urban markets via selective minority stakes and asset management roles in high‑quality retail destinations.
Local authority withdrawal and shift toward partnership models
Local authorities, once major buyers, have largely stepped back. Since 2016, councils have acquired over 18 million sq ft across 80 schemes, representing 24% of all shopping centre transactions. However, financial pressures and concerns around governance and risk management resulted in no shopping centre acquisitions by councils in 2025. Instead, councils are increasingly expected to act as vendors and to explore public–private joint ventures as a route to unlocking redevelopment opportunities while retaining influence. This shift is likely to accelerate as a number of councils merge or consolidate, a process that will undoubtedly create new opportunities for cost savings, shared expertise, and improved access to funding — further reinforcing the role of collaborative structures in future regeneration and asset repositioning strategies.
Outlook: market resilience and renewed momentum
The outlook for 2026 is materially brighter. Early-year sentiment is positive, supported by improving occupational metrics and a healthy pipeline. Seventeen schemes totalling £873m were under offer at the beginning of 2026, pointing toward a robust first half. Full‑year volumes are therefore forecast to exceed £2.5bn — potentially the highest annual total since 2016. Continued yield compression is expected across super-prime (now 7.25%), prime (9.50%), and town-centre-dominant assets (10.50%). Debt market strength will further support competitive bidding processes, particularly among core-plus investors.
A significant pipeline of top-quality assets is anticipated to be brought to market over the next 12 months, estimated at £3bn, including around £900m in partial stake disposals. Much of the activity is expected to be concentrated within the top 30 performing centres; it is expected a third of the top 30 shopping centres will come to the market in 2026/2027, raising the question of whether investors will be willing to move down the quality spectrum into the top 40 or top 50 — especially when you consider of the top 30 assets 17 schemes, or stake interests, are under offer or have already transacted since 2022. This could create new opportunities in the £20–£100m bracket. The market is also poised to absorb an anticipated wave of disposals from ex‑Intu centres in 2026/27, which may align closely with institutional appetite for scale and strategic relevance.
Overall, the shopping centre investment market demonstrated resilience through 2025, navigating geopolitical uncertainty, subdued early-year activity, and wider macroeconomic pressures. The recovery in debt markets, the resurgence of institutional buyers, and a strong pipeline of high-quality assets provide a solid foundation for growth. While 2025 was not a repeat of 2024’s exceptional volumes, the market has re-established its footing, and investor interest — particularly for prime and super-prime assets — continues to strengthen. The next 12 months are expected to bring continued yield compression, increased deployment from core and core-plus capital, and a renewed focus on scale as “big becomes beautiful” once again within the UK shopping centre landscape.
High street retail investment market
The high street retail investment market is stable, supply‑constrained and poised for renewed activity, with strong demand, firm occupational performance and rising investor anticipation creating a clear “calm before the storm".
High streets: market performance
MSCI’s RCA data indicates that the high street retail investment sector continued to perform steadily through 2025. Total urban retail and high street investment transactions reached £2.2bn, effectively unchanged from 2024, with only a marginal 2.1% decline. This total does, however, sit 20.2% below the decade average of £2.7bn. The year was characterised by a pronounced dip in activity during the third quarter, followed by a sharp recovery in the final quarter, where transaction volumes rebounded by 211% to return to the same levels achieved in the first half of the year. Overall, market activity remains constrained, driven far more by limited availability of stock than by wider economic pressures.
Institutional capital and structural drivers of supply
Institutional investors continue to be the principal source of assets coming to market, largely due to ongoing structural changes across defined benefit pension schemes. Disposals are primarily the result of mandate shifts rather than any negative sentiment toward the high street sector. Smaller segregated mandates are either being sold down or absorbed through mergers, often leaving behind lot sizes that no longer fit the strategic profile of the enlarged funds. This structural reallocation of pension capital was expected to provide more liquidity than it has, but progress has been slower than initially assumed, contributing to the reduced flow of stock. At the same time, many institutional owners are actively choosing to retain assets because income returns remain attractive. As a result, supply continues to be constrained. Crucially, there is no overarching or strategic “sell the high street” narrative — instead, the market is experiencing a gradual, orderly release of assets that reinforces a sense of stability and business as usual.
Demand dynamics and shifting interest in larger lots
On the demand side, appetite remains strongest at the sub‑£3m lot size, where private investors and smaller funds continue to offer a deep and consistent buyer base. However, the market is increasingly being tested at the £10m level. This part of the market previously struggled with a limited buyer pool, yet it is now gaining attention from larger-scale and institutional investors. The relative value opportunity is becoming clearer: a £10m asset can typically produce a significantly higher yield than a £2m shop, largely because of reduced competition and pricing inefficiencies. This yield premium is beginning to attract fresh pension fund capital. Institutional buyers are slowly re‑entering the market at the £10m‑plus level. Although not yet a wave, the shift is noticeable, with strategic investors responding to value differentials that have become too compelling to ignore.
The ongoing role of SCPIs
A further important source of demand continues to come from French SCPIs (Sociétés Civiles de Placement Immobilier). These non-listed real estate investment vehicles pool capital from multiple investors and operate similarly to syndicated funds, offering individuals exposure to property without direct ownership. SCPIs have maintained active interest in the UK high street market, particularly within the £3–£10m bracket, and their presence remains an important driver of liquidity within this range.
Occupational market strength and investment case
Occupational market conditions remain strong and supportive of the investment case. Vacancy rates have stabilised, and there are identifiable pockets of rental growth, especially among prime, fit‑for‑purpose assets where tenant demand is solid. Rack‑rented properties continue to deliver compelling income returns, and for many buyers, debt costs remain accretive, further enhancing achievable yields. Savills anticipates a modest uplift in capital values as more assets begin to qualify as prime, underpinned by a benchmark equivalent yield of around 6.5%. For both existing and prospective investors, the overarching message is one of confidence — occupational fundamentals are improving, income returns are attractive, and well‑positioned high street assets continue to offer resilient and long-term value.
Market sentiment: stable but static
In summary, the high street investment market remains stable, supported by firm demand, structural capital shifts rather than sentiment-driven selling, and strong income returns. Although deal progress has been slow and cautious, pricing has stabilised and the sector continues to present compelling opportunities for disciplined investors seeking income and durable performance. Expectations have risen while the supply of stock has fallen, leaving very little currently available for sale. Market sentiment feels increasingly positive, supported by falling interest rates and a sustained improvement in retail occupational performance, yet transactional momentum has been slow to manifest. The sector feels stable, but static.
The market for the asset class is well set and providing a robust platform for trading
James Stratton, UK Investment, Director
Early 2026: The calm before the storm
Entering early 2026, buyers are ready and willing, and the theoretical seller base exists, but actual activity remains muted. This mirrors the situation seen at the end of Q3 last year, which ultimately led to a strong year-end rebound. There remains widespread expectation for the year ahead. The market for the asset class is well set and providing a robust platform for trading, and the current lull feels more like a slight lag at the start of the new year rather than a sign of any deeper market issue. It is, in many ways, the calm before the storm.
Case study: M&S Richmond sale and leaseback
A strong illustration of demand is the sale and leaseback of the Marks & Spencer store in Richmond. The asset, which is being refitted into a full food-led format, was acquired by Aberdeen on behalf of West Sussex Pension Fund at a net initial yield of 5.1% for approximately £20m in December. M&S is investing around £10m into the store, and the sale highlights clear appetite for high-quality retail with strong lease profiles. Private investors were active in pursuing the asset, but ultimately a major UK pension fund prevailed. This transaction exemplifies the depth of demand for large, well-located, operationally relevant retail assets. The market could absorb significantly more stock of this calibre — indeed, the larger and better the asset, the stronger the demand appears to be.
Why supply remains limited
One explanation for the limited supply is that real estate continues to provide strong, stable value for pension funds, leading actuaries to maintain property allocations. Activity in the form of pension fund mergers or portfolio sales in favour of liability matching insurance-style products has perhaps been relatively limited to that anticipated too. Such is a potential catalyst for investment market activity. Similarly, the pooling of county council segregated mandates into fewer, larger funds is expected to be the genesis of transaction volumes as target lot sizes are increased with fund scale, and typically, smaller high street assets could be traded out. Whilst anticipated, such activity is yet to be materially realised in the market.
Outlook: anticipation without action
Broader macro effects are also contributing to reduced day-to-day trading activity. Nevertheless, sentiment towards buying or holding high street retail remains extremely positive. With strong occupational dynamics, attractive yields, stable pricing and a growing pool of institutional interest, all the conditions for a more active market are in place. The only missing ingredient is stock. As more assets come forward — whether through pension restructuring, strategic portfolio adjustments or opportunistic disposals — there is significant headroom for increased transaction activity. For now, however, the sector remains in a period of anticipation without immediate action, a genuine calm before the storm.