UK Retailers Increasing Investment in Physical Stores and Shopping Centres
Knight Frank reports that UK retailers and property investors are shifting capital back into physical stores, with a focus on shopping centres and food stores.
Online retail penetration has stabilized, currently accounting for about 26–28% of total retail sales, down from a peak of 35% in mid-2020.
In the year to September 2025, retail property delivered returns of 9.2%, outperforming industrial property at 9.1% and offices at 3.2%, with shopping centres and food stores each delivering 10.2% returns.
Total investment in retail assets reached approximately £5.8 billion in 2025, a 17% decrease from 2024 due to a shortage of available properties; however, activity increased in the second half of the year.
Knight Frank forecasts investment returns of around 9.5% in 2026 as demand continues to outpace supply.
Significant transactions include Knight Frank managing the sale of Merry Hill near Dudley for about £300 million, attracting ten bidders; Frasers Group's acquisition of Braehead for about £220 million; and Landsec's ongoing negotiations to purchase Silverburn near Glasgow for around £250 million.
The vacancy rate for shops across the UK stands at approximately 13.5%, the lowest level since 2020.
Shop transaction values in the second half of 2025 totaled £420 million, representing a 150% increase from the first half.
Prime shopping centres and regional cities are expected to deliver rental growth of about 6.9% in 2025.
