Retailers in the UK are making a notable shift back to physical stores, suggesting a revitalization of the traditional shopping experience, according to recent studies. This trend is particularly evident in shopping centers and grocery outlets, where investment is on the rise, as reported by the property consultancy Knight Frank.
After enduring a challenging decade marked by widespread store closures—exacerbated by pandemic-related lockdowns and the significant rise of online shopping—the landscape of retail is evolving. During those tough times, many stores faced shutdowns, leading to an unprecedented boom in online sales. However, recent statistics indicate that the growth of online retail has stabilized, hovering between 26% and 28% of total retail sales, down from a peak of 35% in mid-2020.
Interestingly, the retail sector has outperformed all other commercial property categories this year, boasting a remarkable 9.2% return on investments through September—surpassing industrial properties, which saw a return of 9.1%, and office spaces, which lagged at 3.2%. Notably, both shopping centers and food retailers emerged as the top performers, each achieving a noteworthy 10.2% growth in returns.
In a bid to draw visitors, shopping centers are increasingly looking to offer unique experiences, incorporating activities such as zip lines and darts alongside traditional shopping options. While larger malls tend to flourish in this new era, smaller and older shopping centers are struggling, largely due to a trend among retailers favoring fewer, larger locations.
Looking ahead, projections for retail properties suggest an anticipated 9.5% return on investments in the upcoming year. Will Lund, who heads the retail capital markets division at Knight Frank, commented on this shift, stating, "With the plateauing of online shopping, retailers are reinvesting in physical locations, signaling a fundamental change in the retail narrative. We have strong confidence that this demand will drive investment volumes back to levels not seen in a decade by 2026, setting the stage for a bustling year ahead."
Mark Allan, CEO of Landsec, a leading commercial property development and investment firm, recently indicated that the company is prioritizing acquisitions of more retail assets over the next 12 to 18 months—an industry segment that has historically been regarded as "unloved." Landsec, known for managing major shopping destinations like Bluewater in Kent and Trinity Leeds, has divested £295 million worth of office properties to pivot towards retail and residential investments. The firm is currently negotiating the purchase of the Silverburn shopping center near Glasgow for £250 million early next year.
Another prominent developer, British Land, primarily focuses on London office campuses and retail parks, with CEO Simon Carter noting, "As office attendance picks up and retailers expand into suburban areas, the supply in both markets remains highly constrained."
Several shopping centers have changed ownership this year, with supermarkets and food retailers engaging in increased sale-and-leaseback transactions. Knight Frank is overseeing the sale of Merry Hill, a shopping complex in the West Midlands, expecting it to attract offers around £300 million, with ten investors currently in the running.
Last month, Frasers Group, the parent company of Sports Direct, acquired the Braehead shopping center—one of Scotland’s busiest—from SGS UK Retail for a deal rumored to be worth £220 million.
Knight Frank reported that £5.8 billion was invested in retail properties in 2025, reflecting a 17% decline from the previous year due to a shortage of available assets. However, transaction levels picked up in the latter half of the year, and as pricing strengthens, this upward momentum is likely to continue into 2026.
Charlie Barke, head of capital markets at Knight Frank, noted, "The number of willing sellers has diminished as expectations rise regarding the performance of these assets. For the first time in a long while, market supply is limited, with demand for retail investments now outstripping supply."
Currently, the vacancy rate for shops across the UK stands at 13.5%, the lowest level since 2020, and further declines are anticipated for the coming year. In the high street sector, £420 million worth of shops changed hands in the latter half of 2025, marking a significant 150% increase compared to the first half. Prime shopping centers and regional city locations are expected to see rental growth of approximately 6.9% this year.
Sam Waterworth, a partner at Knight Frank, concluded, "Retail has undeniably turned a corner, and 2025 will be remembered as the year the high street began its recovery."
But here’s where it gets controversial: as physical retail makes a comeback, how will this impact the future of online shopping? Will the duality of shopping experiences create a healthier competition, or will one inevitably overshadow the other? We’d love to hear your thoughts on this evolving retail landscape in the comments below!
