KEY TAKEAWAYS

Investment

• Strong capital depth meets a controlled flow of stock, resulting in a balanced, steady market with sustained liquidity and pricing discipline rather than volume-driven momentum.
  
  
• Resilient pricing despite uncertainty: Prime yields have remained stable at 5.25%–5.75%, reflecting robust investor conviction underpinned by strong occupational fundamentals and income security.
  
  
• Buyer base becoming more international and concentrated: Overseas capital has grown significantly, with players such as Realty Income emerging as highly active, scalable buyers influencing pricing and deal flow.
  
  
• Occupational strength underpinning investment appeal: Low vacancy, strong tenant credit and constrained supply continue to support rental growth prospects and position retail warehousing as a compelling risk-adjusted sector.
  
  
• Outlook supported by weight of capital: A broader three-tier buyer pool and significant capital allocation suggest continued liquidity, with transaction volumes dependent on improving vendor confidence rather than investor demand.

Pricing stability and market resilience

The UK retail warehouse investment market has remained in comparatively good shape over the last 18 months, despite a backdrop of continued macroeconomic and geopolitical uncertainty. Prime yields for both Open A1 and restricted retail warehouse schemes have remained unchanged at 5.25% and 5.75% respectively. That stability is notable. In more than 20 years of tracking the sector, we have not previously seen both prime benchmarks hold at those levels for such an extended period. This is particularly striking given the range of uncertainty the market has had to absorb, including concern around US–UK tariffs, the implications of the UK Budget, and wider geopolitical tensions. Ordinarily, that level of uncertainty would be expected to generate greater outward movement in pricing. Instead, the investment market has remained remarkably resilient, reflecting both the strength of underlying occupational fundamentals and continued demand for the right assets.

A functioning market with measured supply

Importantly, the market is not constrained by a shortage of capital. If anything, the opposite is true – it is available and the pool of capital is growing, particularly at the prime end of the market. While supply remains steady, this has not translated into an absence of opportunity. Transactions continue to progress, with a steady flow of assets coming forward and a depth of demand ensuring competitive tension where product is available.

The market is therefore characterised less by a lack of activity and more by a measured pace. Buyers remain engaged, attracted by pricing and the underlying strength of occupational fundamentals, and there is still a sufficiently large and active audience for well-located retail warehouse assets. In addition, situations such as fund liquidations, redemptions and other motivated sales are providing a pipeline of opportunities, ensuring that capital can be deployed.

In that sense, the current environment is well balanced. While some caution persists among owners of the very best assets on whether this is the right moment to crystallise value, this has not prevented deals from completing, nor has it materially diminished investor appetite. Rather than a surge in stock, the market is seeing a steady release of opportunities, which continues to underpin liquidity and pricing discovery.

Volumes and activity trends

Transaction volumes in 2025 were still generally good by historical standards, although below the exceptional levels recorded in 2024. Total retail warehouse investment reached £2.4 billion in 2025, a 30% reduction on the £3.5 billion transacted in 2024. However, the way those volumes were delivered was almost the inverse of the previous year. Whereas 2024 saw its recovery driven by a strong second half, 2025 was front-loaded. Q1 2025 totalled £767 million, compared with £456 million in Q1 2024, while Q2 reached £815 million, against £365 million in Q2 2024. Activity then moderated materially in the second half, with Q3 2025 at £456 million, well below the exceptionally strong third quarter recorded in 2024, and Q4 ending the year at £391 million, again reflecting a quieter close to the year than that seen in late 2024.

Early 2026 has started reasonably well, with £660 million traded in Q1. While that was 14% below Q1 2025, it was a 69% increase on the previous quarter, indicating that liquidity remains present.

Depth of market and new entrants

Even so, the volume story needs some qualification. Market turnover looks less compelling once portfolio sales are stripped out and Realty Income’s activity is excluded. Similarly, the amount of genuinely prime stock transacted remains limited. There are clear positive narratives around liquidity and demand, but the market is still not seeing many true prime schemes openly tested. That, again, reflects vendor caution rather than a lack of appetite from purchasers.

Indeed, one of the more encouraging features of 2025 was the emergence of new entrants. Around 20% of purchases, equivalent to roughly £600 million, came from buyers new to the sector. That included ICG, Farren, and Ashtrom, the latter having acquired Team Valley from ARES in February 2026 for £102.5 million at a 7.50% net initial yield. The arrival of new capital into the market is significant and reinforces the breadth of investor demand now targeting the sector.

Realty Income: scale and strategy

Notwithstanding this broadening demand base, Realty Income continues to dominate purchasing activity in UK retail warehousing. The group now owns 142 retail parks, comprising more than 17 million sq ft, alongside 38 B&Q stores, 13 additional solus units, and 7 standalone foodstores. The scale of its activity is increasingly influential in shaping the market. In January 2025, Realty acquired a three-asset retail park portfolio from AshbyCapital for just over £220 million, comprising Morfa Shopping Park, Swansea, Westside Shopping Park, Guiseley, and Abbotsinch Shopping Park, Paisley – a portfolio of more than 730,000 sq ft across 46 tenants. The transaction was a good example of how Realty has scaled through portfolio acquisitions as well as single-asset deals.

These were dominant, regionally important parks with bulky and omnichannel tenant lineups, low vacancy and asset management already substantially executed. That strategy is not unique to Realty; it also reflects the wider approach of a number of active buyers in the sector, who are targeting income-led, prime or near-prime retail warehouse stock with strong catchments, established occupational performance and limited leasing risk.

Realty’s emergence as one of the market’s most significant acquirers is reflected in the data. Its share of annual acquisitions rose from 3.3% in 2020 to 14.7% in 2021, before increasing sharply to 33.0% in 2022 and 38.3% in 2023. Although that share moderated to 15.8% in 2024, it rebounded to 30.4% in 2025, equivalent to £834.6 million of acquisitions. Over the same period, the number of parks acquired by Realty increased from just 2 in 2020 to 21 in 2025, having peaked at 31 in 2023, while the amount of floorspace purchased rose from 209,918 sq ft to 3.35 million sq ft.

This is no longer a selective participant picking off the occasional opportunity; Realty has become one of the market’s most scalable and active sources of demand, particularly for larger lot sizes. Its acquisition of The Lexicon in Bracknell last year also highlights an expanding comfort with wider retail formats, although retail warehouses remain central to the strategy.

Investor composition and internationalisation

More broadly, the retail warehouse buyer base has become significantly more international. Institutional investors accounted for 55.5% and 64.1% of activity in 2020 and 2021, respectively, underlining the sector’s traditional appeal to UK domestic capital. However, that share fell to 46.3% in 2022, 38.7% in 2023, recovered to 50.0% in 2024, and slipped again to 36.4% in 2025. This does not reflect a weakening in institutional demand, but rather the growing presence of overseas capital, which has increased sharply from 4.9% in 2020 to 48.3% in 2025, making it the largest source of capital last year. Much of this international capital has been focused on higher-yielding core-plus and off-prime assets. The result is a market that is now far more internationally driven than it was five years ago. That shift is important, both because it broadens the buyer universe and because it introduces capital with different return requirements and pricing behaviour.

Cost of capital and pricing dynamics

That is particularly evident in the case of Realty. The company’s yield profile has moved materially over time and is increasingly shaped by its cost of capital, rather than by prevailing UK market pricing alone. In practical terms, that means Realty is often able to underwrite acquisitions at tighter yields than many domestic buyers, particularly on income-secure, larger-scale assets. Its required return is informed by the cost at which it can raise debt and equity, rather than solely by where UK institutions believe property should trade.

As a result, Realty’s pricing has become more competitive and, in turn, the quality of asset it is capable of targeting has also moved up. This growing influence of global capital has supported firmer pricing for prime, long-income retail warehouse stock and helps explain why prime yields have remained so stable even against a volatile macro backdrop.

Investment rationale and occupational strength

The strength of investor appetite ultimately stems from the sector’s occupational characteristics. Retail warehousing continues to offer one of the most compelling risk-adjusted propositions in UK commercial property. Tenant credit quality is strong, rental growth prospects are favourable, vacancy is low, and many schemes increasingly play a role in retailers’ supply chain and last-mile fulfilment strategies. Combined with robust consumer appeal, easy accessibility and free car parking, these attributes have reinforced the sector’s attractiveness. Put simply, when overseas investors assess the market, they often talk in terms of “baskets of credit”. On that basis, retail warehousing compares very favourably with other sectors.

Savills’ ICANS Tenant Global Score, which measures the financial strength and stability of retailers based on public accounts, indicates that the sector’s leading operators remain in robust health. Of the top 50 operators by number of units across retail, leisure and shopping parks combined, excluding food and beverage, 37 (74%) are considered low risk or very low risk and are above average on the ICANS measure. In our view, the relationship between risk and return therefore looks more favourable in retail warehousing than in sectors where occupational fundamentals are less secure.

Supply constraints and rental growth outlook

This is further reinforced by the current supply-and-demand imbalance. Occupational demand remains solid, while new supply is negligible. In the medium term, that combination can only point to one direction of travel for rents.

Retail warehouse rents have already been rebased in many locations, schemes are broadly well let, and the better assets continue to offer opportunities for asset management. The challenge is less about whether rental growth exists and more about the timing and visibility of that growth. At present, landlords often struggle to get units back in order to capture it, which means the rental upside can look paused or nuanced in the short term. However, the underlying pressure remains there and will become more visible when the right leasing opportunities emerge.

Evolution of the buyer pool

An important evolution over the last 12 to 18 months has been the development of a three-tier buyer pool, rather than the more binary capital structure that existed previously.

The first pool is core capital. Here, there has been a structural shift in the UK fund market as more local authority pension money is pooled into larger vehicles. Border to Coast is one example, and similar structures are being rolled out elsewhere, including in Wales. These pooled vehicles are likely to become some of the most significant sources of core real estate capital over the next five years. Their return requirements are relatively low – broadly 5.0% to 7.5% IRRs – and, as a result, they are the natural purchasers for the strongest, most institutionally acceptable retail warehouse assets.

The second pool comprises capital that sits between core and value-add, including a growing number of French SCPI buyers. These investors are becoming increasingly important. Unlike many UK funds, they are often under greater pressure to deploy capital rather than hold cash, which means they can look through some of the short-term headwinds that deter others. We understand there are around 96 French SCPI buyers currently looking at the market, and they are likely to become a far more powerful force over the next few years, with the potential to invest anywhere between £20 million and £200 million per vehicle. Their return requirements are broadly 6.0% to 8.0% IRRs.

The third pool is value-add capital, often using debt, looking for 10% to 15%+ returns and typically targeting assets at around 7%, 8% or 9% yields.

The asset universe each group targets is, naturally, quite different.

Liquidity and sources of future stock

This evolution in the buyer pool matters for outlook because it should give vendors greater confidence. There are now billions of pounds of capital either already allocated to the sector or likely to be allocated over the next few years. That has to support liquidity. For owners of good quality assets, particularly those that fit the requirements of pool one buyers, the demand side is there.

The key question increasingly is not whether the capital exists, but where the stock will come from. Potential sources include continued retail fund wind-downs, redemptions, selective profit-taking from buyers who entered in 2020 or 2021, and portfolio break-up activity, particularly from private equity. The market is also beginning to see more cycle trading, helped by the gradual widening of debt availability and the growth in the number of large-lot buyers.

Team Valley is a good example. In previous years, a scheme of that nature may have attracted only one realistic bid; now it can attract several, including from credible new entrants. That illustrates the extent to which more capital is now prepared to target larger lot sizes than has been the case in recent years.

Lot size dynamics and market behaviour

The one area where demand has softened is the smaller lot-size segment. In the context of conflict in the Middle East and disruption around the Strait of Hormuz, the £5 million to £15 million market, where private investors and property companies are more prevalent and where individuals often have a greater say in deployment, has seen sentiment switch off quickly. By contrast, in the £20 million-plus market, where institutions and larger capital pools dominate, there has been little meaningful pause.

Investors are increasingly accustomed to operating in uncertain conditions. The last five years have presented shock event after shock event, and the market has learned that if capital is to be deployed at all, it will often have to be committed in periods of uncertainty rather than calm.

Location strategy and asset selection

Geography is typically less critical in this sector than in many others, with performance more closely aligned to asset quality than broad regional positioning. The key is not simply to buy in the strongest region, but to secure the dominant scheme within a catchment, where occupational resilience, tenant mix and market share underpin performance and liquidity. That said, geography retains greater importance at the prime end of the market. For the very best assets, location within structurally strong and affluent catchments remains a key differentiator, helping to support pricing tension and depth of demand. As a result, while dominant schemes continue to outperform across the country, prime assets in the strongest locations remain the most sought after, even as demand elsewhere in the market is less selective.

Market position and risks

Overall, the investment market remains in a good place. Occupationally, the sector is healthy. There have been one or two operator wobbles, but nothing beyond what a market in this sort of condition can absorb, and certainly nothing out of the ordinary by historic standards. On the investment side, there are enough buyers and not enough stock, particularly at the better end. That means it is both a reasonable time to buy and a reasonable time to sell, provided pricing expectations are realistic.

There are some ongoing concerns around the debt market, and a reduction in debt costs would undoubtedly help off-prime pricing. If interest rates were to move materially in either direction, pricing would respond. Secondary locations remain the part of the market most exposed to that risk. If there were to be retail failures alongside higher borrowing costs, secondary and tertiary yields could move out more noticeably than prime. For now, however, that dislocation remains limited. Yields have broadly held across the market, and decent assets continue to achieve good prices.

Investment outlook

Looking ahead, our expectation is that retail warehouse investment will remain relatively liquid through the remainder of 2026, supported by a deeper and more diversified buyer pool than the market has seen for some time. Prime pricing should remain firm while stock remains scarce, and the likelihood is that any meaningful softening would be concentrated in weaker, debt-dependent secondary product rather than the best schemes. The biggest determinant of volume will continue to be vendor confidence. If more owners become convinced that buyers are prepared to transact through geopolitical and economic uncertainty – and evidence increasingly suggests they are – then more stock should come forward. In that scenario, transaction volumes could improve meaningfully, particularly in the £20 million-plus segment where institutional and overseas demand is strongest.

In the meantime, the attraction of the sector remains clear: investors can still secure a relatively solid 6.5% to 7.0% income return in many cases, often with very limited vacancy risk, strong tenant demand and a clear medium-term rental growth story. In the current environment, that remains a compelling place to deploy capital.

_{Read the articles within Spotlight: UK Retail Warehousing below.}