UK retailers are investing more in bricks and mortar, with shopping centres and food stores leading a revival, according to research.
Retailers and property investors are reallocating capital back into physical stores, according to the property group Knight Frank.
The switch represents a fillip for high streets and shopping centres after a difficult decade, which culminated in the shutdown of most stores during pandemic lockdowns and an accompanying surge in online shopping.
The growth in online retail has fallen back and flatlined at between 26% and 28% of overall retail sales since a peak of 35% in mid-2020.
Retail has outperformed all other types of commercial property this year, with 9.2% returns on investments in the year to September, Knight Frank said. This is ahead of industrial properties, at 9.1% and offices at 3.2%.
Shopping centres and food stores are the joint top performers this year, each delivering 10.2% growth in returns.
Shopping centres are now seeking to attract visitors with “experiences” and activities such as zipwires and darts, to complement shops. While large centres tend to do well, smaller, older malls are suffering because retail chains’ preference for fewer larger stores, Knight Frank said.
Next year, retail property is forecast to deliver investment returns of 9.5%.
Will Lund, the head of retail capital markets at Knight Frank, said: “With online penetration flatlining and retailers reinvesting in physical space, the narrative around retail has fundamentally changed. We have great confidence that this demand is going to drive a return to decade-high investment volumes in 2026 and we are expecting a busy year.”
In November, the chief executive of the commercial property development and investment company Landsec, Mark Allan, said it was prioritising buying more retail assets over the next 12 to 18 months, in a sector that had long been considered “unloved”.
Landsec, which owns and manages large shopping centres such as Bluewater in Kent and Trinity Leeds, has sold £295m of offices as it shifts towards retail and residential. The company is in talks to buy the Silverburn shopping centre near Glasgow for £250m early next year.
British Land, another big developer, focuses mainly on London office campuses and retail parks. “Office attendance is accelerating, retailers are expanding out of town, and supply remains very constrained across both markets,” its chief executive, Simon Carter, has said.
A number of shopping centres have changed hands this year and supermarkets and other food stores have increased sale-and-leaseback transactions.
Knight Frank is managing the sale of Merry Hill near Dudley and expects to sell the West Midlands shopping complex for £300m, with 10 investors bidding.
Last month, Frasers Group, the owner of Sports Direct, bought the Braehead shopping centre near Glasgow, one of Scotland’s busiest, from SGS UK Retail in a deal reportedly worth £220m.
Knight Frank estimated that £5.8bn was invested in retail assets in 2025, down 17% from the previous year because of a shortage of properties. Transaction levels rose in the second half if the year, and with pricing strengthening, that momentum is expected to carry into 2026.
Charlie Barke, the head of capital markets at Knight Frank, said: “We’ve got fewer willing sellers because people are expecting these assets to start to perform well again. So stock supply to the market is limited for the first time in quite a long time, and now demand for investments exceeds supply in the retail sector.”
Across the country, 13.5% of shops stand empty, the lowest vacancy rate since 2020, with a further drop expected next year.
On the high street, £420m of shops were traded in the second half of 2025, up 150% on the first half. Prime centres and regional cities are expected to deliver rental growth of 6.9% this year.
Sam Waterworth, a partner at Knight Frank, said: “Retail has decisively turned a corner with 2025 marking the high street’s rebound.”