Retail property is expected to deliver landlords annual returns of 9.5% in 2026 after outperforming other sectors in 2025, analysis from Knight Frank shows.
Businesses are now refocusing on having a physical premises after online penetration flatlined, while Shopping Centres and Foodstores lead the way in terms of retail’s success.
Sam Waterworth, partner, high street – capital markets, Knight Frank, said: “Retail has decisively turned a corner with 2025 marking the high street’s rebound.
“Occupational markets are the strongest they’ve been in over a decade and pricing has rebased, which is clearly reflected in retail’s total return performance.
“Retail’s high income return and improving rental dynamics continue to attract capital, with an increasing numbers of investors deploying where cashflows are durable and risk is appropriately priced.”
Total retail investment volumes are forecast to reach £5.83bn in 2025, down 17% year-on-year and 8% below the 10-year average, with the shortfall largely driven by a lack of available stock rather than weakening demand.
However with pricing strengthening and rental growth feeding through, transaction levels improved meaningfully in the second half of the year and momentum is expected to carry into 2026.
Retail delivered 9.2% total returns year-to-date to Q3 2025, the strongest performance of all traditional property sectors, outperforming Industrial (9.1%), Offices (3.2%) and All Property (6.6%).
Shopping Centres and Foodstores each delivered annual returns of +10.2%, underscoring the increasingly broad-based nature of the retail recovery.
The latter saw transactions accelerate sharply in the second half of the year, with £1 billion worth of property traded.
High Street retail also saw a meaningful rebound in activity, with £420m transacted in H2 2025, a 150% increase on H1. Competitive bidding has re-emerged in prime centres and regional cities, supported by the strongest rental growth in the retail market, forecast at +6.9% for 2025.
Will Lund, Partner, head of retail – capital markets, Knight Frank, added: “With online penetration flatlining and retailers reinvesting in physical space, the narrative around retail has fundamentally changed.
“Shopping Centres and Foodstores are now leading performance across all real estate, while Retail Warehousing remains the occupational darling.
“Across the board, retail is a holistically investable sector. 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 across all of the subsectors.”