In spite of the lingering effects of the pandemic and subsequent cost-of-living crisis, retail has continued a slow but steady recovery in 2025. On a rolling twelve-month basis, retail sales volumes and values increased by 1.2% and 1.9%, respectively, in June 2025. In volume terms, this marks the strongest expansion in retail sales volumes since April 2022.

Consumer confidence has been adversely affected by global macroeconomic conditions, following a decline in April, consumer confidence and the climate for major purchases improved in May and June. Across all asset classes, MRI UK footfall figures show modest gains in footfall, with retail parks (+2.5%) the strongest performing asset class, followed by shopping centres (+1.8%) and high streets (+1.1%).

Vacancy rates on the high street (16.9%) and in shopping centres (13.6%) have fallen over the four quarters to Q2 2025, while the vacancy rate in the retail warehouse (5.0%) has edged up marginally since the start of the year. Coupled with stabilising footfall and a growing volume of operators seeking space across the sub-markets, the overall retail sector appears to be in a significantly better position than in recent years.

With April 2026’s business rates overhaul nearing, many retailers are facing further increases to operating costs. Large retailers will take the brunt of this, with an estimated tax burden of £600 million for major retailers and supermarket operators. Small retailers are contending with increased overheads following the current reduction in rates relief, while larger chains anticipate passing on tax costs through price hikes when the reforms take hold in Q2 next year.

Development in the retail sector was recently well summarised by Trinny London MD, Mark Smith, who was quoted as saying, “Retail doesn’t need more stores, it needs better ones.” As such, much of the development that has occurred in the sector has focused on rebuilding previous schemes.

The challenges continue to incentivise landlords to optimise existing asset use, carving up larger units, or in the case of larger retailers, encouraging concessions, click and collect facilities or experiential retail. There is a scarcity of available contractors, which is driving up fit-out times and construction costs limiting the ability to deliver the higher quality finish of experiential retail offerings.

Compounding on the challenges above, shrinkage has become an increasing issue. This has forced retailers to make changes to their stores and IT infrastructure. Personnel changes, such as increased use of undercover security officers, are yet another cost that retailers are now having to take on in order to deal with these issues.

_{Read the articles within Savills Build: Perspective report below}