UK retail property remains top investment bet for 2026

Knight Frank's latest Retail Investment Update reveals that the retail property sector consolidated its position as the best-performing property asset class in 2025 in the UK.

UK retail - Cushman and Wakefield

The trend is expected to continue into 2026 despite challenging macroeconomic conditions.
All Retail achieved a total return of 9.6% in 2025, outperforming "All Property" (6.6%), "Industrial" (9.1%), and "Offices" (5.0%). Shopping Centres and Foodstores led with 10.2% returns.
This strong performance was driven by a "holy trinity" of capital growth (+3.3%), income return (+5.8%), and rental growth (+3.5%). Rental growth reached its highest level since 2006.
The occupational market (tenant demand) was the strongest in over a decade, with national vacancy rates likely to return to pre-COVID levels (12.4%) by 2026.
Total retail investment volumes in 2025 reached £5.83 bn (€6.82 bn), down 17% from 2024, largely due to a supply shortage, especially in Shopping Centres. Retail Warehousing accounted for 42% of these volumes.
Outlook for 2026:
Despite a forecast of modest UK GDP growth (+0.9%) and persistent inflation above the 2% target, "All Retail" is projected to deliver total returns of 9.5% in 2026. Foodstores (10.4%) and Shopping Centres (9.5%) are expected to lead.
Retail investment volumes are anticipated to improve significantly in 2026, with a strong pipeline of "big ticket" shopping centre deals following momentum built in late 2025.
Retail occupier markets are in their best shape in over a decade, characterised by declining vacancy rates (projected to hit pre-COVID levels by end-2026), sustainable rental growth (forecast +3.0% in 2026), and renewed investment by retailers in physical stores.
Knight Frank’s report notes that structural changes, such as the plateauing of online retail penetration (around 28%), indicate a re-balancing of investment towards physical stores by major retailers.
While Retail Warehousing saw a slowdown in investment activity in late 2025, Foodstores and Shopping Centres are now supplanting it as the top-performing asset classes. High Street retail also showed significant improvement in the latter half of 2025.