Cautious consumer spending sees UK retail sales remain subdued in October 2025, but historically, this has proven to be a prelude to elevated demand during Black Friday and the festive trading season
UK prices rose by 3.8% over the twelve months to September 2025, maintaining the same annual growth rate seen in July and August, and up from 3.6% in June. This plateau suggests a potential slowing of inflationary momentum, but underlying pressures—particularly in food, transport, and services—remain entrenched. The Consumer Price Index (CPI) continues to exceed the Bank of England’s 2% target, reflecting persistent cost challenges for both businesses and consumers.
Unable to fully absorb these rising costs, many businesses have been forced to either pass them on to consumers or cut staffing levels
Sam Arrowsmith, Director, Commercial Research
Retail and leisure operators have been hit especially hard by recent fiscal measures. The government’s decision to raise employer National Insurance Contributions from 13.8% to 15%, alongside a lowered contribution threshold of £5,000, has significantly increased staffing costs. This burden is compounded by a 6.7% rise in the National Minimum Wage, now at £12.21 per hour for workers aged 21 and over—affecting a sector heavily reliant on both hourly and seasonal staff.
Unable to fully absorb these rising costs, many businesses have been forced to either pass them on to consumers or cut staffing levels. According to the Office for National Statistics (ONS), employment in the UK’s retail and leisure sectors fell to 2.78 million in September, marking a record low and a year-on-year (YoY) decline of 97,000 jobs. This has raised alarms across the industry, with the British Retail Consortium (BRC) warning that escalating costs are placing unsustainable pressure on high street businesses.
Industry leaders are now calling on the Chancellor to avoid further tax increases in the upcoming Budget, cautioning that additional burdens could accelerate job losses, reduce service capacity, and drive prices even higher—further destabilising a sector already operating under intense financial strain.
Monetary policy outlook: Rate cuts in question amid labour market tensions
This entrenched inflationary backdrop presents an ongoing challenge for the Bank of England (BoE), which closely monitors core trends when setting interest rates. With services inflation remaining stubbornly high, policymakers have been cautious about loosening monetary policy too soon, even as headline inflation shows signs of easing. As of November 2025, the BoE has held the base interest rate at 4.0% following a narrow 5–4 vote, reinforcing its cautious stance amid persistent inflation and economic uncertainty.
This decision marks the second consecutive hold since the 0.25 percentage point cut in August—the first reduction since May. The Monetary Policy Committee (MPC) remains divided: in the latest vote, five members supported maintaining the rate, while four pushed for a further cut to 3.75%. The Bank’s rationale reflects a complex economic backdrop: although headline inflation has eased to 3.8%, still nearly double the 2% target, services inflation and wage growth remain elevated, sustaining core inflation and limiting the scope for aggressive monetary easing.
Meanwhile, UK unemployment rose to 4.7% by June 2025, a four-year high that points to increasing slack in the labour market—typically a disinflationary signal, as reduced demand tempers wage growth and consumer spending. Yet wage growth remains robust across sectors, sustaining cost pressures and keeping core inflation elevated. This tension has prompted the BoE to proceed cautiously, wary of loosening policy too quickly and risking a resurgence in inflation; while labour market softness might normally justify rate cuts, persistent wage-driven inflation suggests the economy is not cooling uniformly.
The MPC’s split decisions in both August and November underscore the uncertainty surrounding the inflation outlook and the appropriate pace of rate adjustments. This implies that future rate decisions may be more contested, with policymakers likely to demand clearer evidence of broad-based moderation before committing to further easing. This uncertainty could prolong elevated borrowing costs for consumers and businesses, delaying relief for high street retailers and other demand-sensitive sectors.
Furthermore, a range of external pressures continue to create a more uncertain operating environment, where cost inflation and consumer hesitancy threaten recovery and growth across the high street retail sector. Geopolitical instability and trade policy shifts—such as renewed tariffs under President Trump, ongoing conflict in Russia and the Middle East, and heightened exchange rate volatility—pose indirect but significant risks to UK retailers. Tariffs on imported goods, particularly food, clothing, electronics, and household items, are raising input costs for retailers reliant on global supply chains. At the same time, currency fluctuations driven by geopolitical tensions and divergent monetary policies are complicating procurement and pricing strategies, especially for retailers sourcing internationally.
Meanwhile, conflict-related energy market disruptions are also elevating fuel and utility costs, further squeezing margins for high street stores, particularly those operating large-format premises or energy-intensive operations. As these pressures accumulate, rising prices and economic uncertainty may lead consumers to cut back on discretionary purchases, softening demand across fashion, home goods, and other non-essential retail categories. This fragile consumer environment underscores the need for retailers to remain agile in pricing, inventory management, and promotional strategy as they navigate a volatile trading landscape.
Business rate reform: Will it help or hinder high street retail?
The UK’s latest business rates reform—announced by Chancellor Rachel Reeves—is set to reshape how commercial properties are taxed, with major implications for retailers and high street businesses. The overhaul, due to take effect from April 2026, introduces a higher surcharge of up to 20% on large commercial properties with a rateable value above £500,000—expected to add £600 million in tax burden to major retail operators. This could directly impact large-format stores such as department stores, supermarkets, and national chains, where rising costs and competitive pressures are already squeezing margins. To offset these costs, retailers may be forced to raise prices, reduce staffing, scale back investment, or reconsider the viability of underperforming sites.
Conversely, the reform introduces lower rates for smaller businesses—essentially, the surcharge on larger properties will fund relief of up to 40% for any occupied retail, hospitality, or leisure (RHL) property with a rateable value below £51,000. These venues will benefit from permanently reduced multipliers, designed to ease financial pressure on independent operators and high street establishments such as local shops, cafés, and small-format retailers.
However, interim changes for the 2025–26 financial year have reduced RHL relief from 75% to 40%, leaving many small high street businesses facing steep rate increases and heightened financial pressure in the meantime. Although the reforms aim to rebalance the tax system, industry groups—including the BRC and leading operators such as Marks & Spencer (M&S) and Tesco—have warned they could accelerate store closures, discourage investment, and shift costs onto consumers as businesses look to absorb the new tax burden. This is why many retail leaders are urging the government to exclude high street retail from the higher business rates multiplier, warning that the proposed reform could undermine recovery and long-term viability.
Nevertheless, both large chains and independent retailers are re-evaluating operations amid rising costs and shrinking margins. Smaller venues are contending with increased overheads following the reduction in rates relief, while larger groups anticipate passing on tax costs through price hikes when the reforms take hold in Q2 next year.
The Centre for Retail Research (CRR) forecasts over 17,000 store closures in the UK for 2025, approximately 14,000 of which will be independent businesses, many located on the high street. Meanwhile, a recent BRC survey found two-thirds of CEOs plan to raise prices in the coming months, citing rising employment and tax costs—posing further risks to inflation and undermining recovery across the retail economy. With final multiplier rates and relief details due in the Autumn Budget, the sector faces an uncertain outlook as it adjusts to one of the most significant business rates changes in decades.
Consumer confidence continues to fluctuate month on month as economic uncertainty prevails
GfK’s YoY consumer confidence data reveals that monthly sentiment shifts remain reactive to external factors such as inflation, interest rate changes, and fiscal speculation. The index fluctuated through mid-2025, with modest gains in June and August offset by declines in May, July, and September. October saw a two-point rebound to -17, driven by improved views on major purchases and short-term economic expectations. Yet, personal finance sentiment remained weak, and looming tax increases in the Autumn Budget continue to cast uncertainty over the outlook, suggesting that confidence may remain fragile heading into winter.
For high street retailers, turbulent consumer confidence presents both challenges and opportunities
Sam Arrowsmith, Director, Commercial Research
Supporting this view, Deloitte’s Consumer Tracker reported a decline in overall confidence in Q2 2025—the first drop since Q3 2022. The index fell by 2.6 percentage points to -10.4%, its lowest level since Q1 2024, driven by concerns over job security, personal debt, and a slowing labour market. However, Q3 2025 also saw a modest recovery, with the index rising by 0.4 percentage points to -10.0%, supported by improved perceptions of job security (+1.2 points), career progression, and general wellbeing. Interestingly, while sentiment toward personal finances remained fragile, consumer views on the UK economy itself deteriorated, suggesting a reversal from earlier trends where macroeconomic optimism had outpaced household confidence. This divergence highlights the complex and uneven nature of the recovery and aligns with the recent GfK data that suggests consumer confidence remains highly volatile—quickly dampened by emerging economic challenges, and only cautiously restored as their impacts become clearer.
For high street retailers, turbulent consumer confidence presents both challenges and opportunities. While short-term improvements may drive occasional spikes in discretionary spending—such as fashion, home goods, and seasonal purchases—persistent economic uncertainty and cost-of-living pressures continue to weigh heavily on household budgets. The September decline in sentiment, despite lower interest rates, suggests that consumers remain cautious about non-essential retail purchases. October’s slight uptick indicates some resilience, but overall sentiment remains fragile, with spending patterns likely to stay reactive to fiscal developments and broader economic signals.
Retailers, particularly those on the high street, may need to adapt to unpredictable demand by deploying flexible pricing strategies, targeted promotions, and a clear focus on value. As the sector heads into the autumn and winter trading period—anchored by Black Friday and Christmas—maintaining consumer engagement will depend on how effectively businesses respond to shifting sentiment, inflationary pressures, and evolving consumer priorities.
UK retail sales remained subdued in October 2025, with high street recovery fragile amid cautious consumer spending
UK retail sales lost momentum in October 2025, following a stronger performance in September. According to the ONS, “All Retailing excluding automotive fuel” saw a YoY increase of 2.0% in sales volumes and 3.8% in sales values in September, buoyed by late summer weather and strong demand for clothing and non-food items. However, this trend reversed in October, with volumes falling by 2.4% and values rising by just 1.3%. The decline in volume indicates a reduction in the quantity of goods purchased, while the modest rise in value suggests that inflation continued to drive up prices without a corresponding increase in consumer activity.
This slowdown was mirrored in broader retail indicators. While ONS data showed that retail sales volumes rose by 0.9% in Q3 overall, the BRC reported that total retail sales in October grew just 1.6% YoY—the weakest performance since May and below the twelve-month average of 2.1%. Food sales remained resilient, increasing by 3.5%, but non-food sales rose only 0.1%, reflecting consumer hesitancy around discretionary purchases such as clothing, electronics, and home goods.
Barclaycard data further underscored the cautious mood. Consumer card spending fell by 0.8% YoY in October, with essential spending down 2.5% and discretionary spending flat at just 0.1% growth. This suggests that households were tightening budgets across the board, rather than shifting spending between categories. Confidence in household finances also deteriorated sharply—from 74% in September to 63% in October—as concerns over inflation, energy bills, and the upcoming Autumn Budget weighed on sentiment (Barclays Consumer Spend Report, October 2025).
This subdued activity may reflect a strategic pause in consumer spending, as households delay discretionary purchases in anticipation of deeper discounts and seasonal promotions. The restraint observed in October is likely a prelude to elevated demand during Black Friday and the festive trading season, when value-led offers and gifting opportunities typically drive a surge in retail activity—a pattern also seen in October 2024, when consumers similarly held back ahead of peak promotional events.
Festive Retail Outlook 2025: Value-driven demand and strategic promotions shape Black Friday and Christmas trading
Looking ahead, Black Friday 2025 (28 November) is shaping up to be a pivotal moment for high street retailers. According to YouGov, 35% of UK consumers plan to shop during Black Friday or Cyber Monday, with Gen Z showing the highest intent at 52%. Retailers are responding by extending promotional windows and leaning into value-led strategies, as many shoppers are holding off purchases in anticipation of deeper discounts. BlackFriday.com and VoucherCodes analysts in partnership with GlobalData expect average discount levels to range from 17–20%, with tech, fashion, and home goods among the most sought-after categories.
For the Christmas period, Retail Economics forecasts that UK consumers will spend a record £91.12 billion, a 3.2% increase compared to last year, although sales volume is projected to decline by 0.3%, indicating that growth will be driven more by price inflation than increased purchasing activity.
In fact, retailer sentiment heading into the festive quarter reflects both optimism and caution. Next has upgraded its full-year outlook, now forecasting 7.5% growth in sales and a 9.3% rise in profits to £1.11 billion, citing strong Q3 performance and expectations of continued momentum through Q4, reflecting confidence in festive trading despite broader economic headwinds. The company attributes its confidence to better-than-expected trading conditions and disruption at rival M&S, which experienced a cyberattack earlier in the year that temporarily suspended online operations.
M&S is a microcosm of the wider markets guarded optimism. It enters the festive quarter with a credible recovery plan following the significant disruption caused by its earlier cyberattack. In H1 2025, group revenue rose by 22.1% to £8.0 billion, bolstered by a £1.5 million contribution from the consolidation of Ocado Retail. Excluding Ocado, sales were broadly flat YoY—an outcome viewed as resilient given the scale of the incident. However, the attack led to a 45.7% decline in group operating profit before adjusting items, driven by one-off costs and temporary online disruption. M&S had previously warned of a potential £300 million hit to full-year profits.
The food division has been a stabilising force, with H1 sales up 7.8% to £4.5 billion, supported by value-led ranges. Its unique own-brand proposition helped retain customer loyalty, with 57.1% of shoppers citing exclusive products as a reason for continued spend during the outage. Despite margin compression from 5.1% to 2.0% due to markdowns and wastage, M&S expects organic margin recovery in H2, with Q3 food sales likely to outperform the broader UK grocery market.
In contrast, the fashion, home and beauty segment saw sales fall 16.4%, with online revenue down 42.9% amid stock shortages and reduced footfall. The disruption prompted 13% of consumers to switch to competitors like Next. M&S has responded with aggressive Sparks loyalty discounts, but analysts suggest a shift toward more targeted, time-sensitive promotions and personalised offers will be key to restoring profitability and driving impulse purchases during the golden quarter.
Primark, meanwhile, is approaching Q4 with measured expectations. Analysts note that while the retailer continues to expand its UK store footprint and experiment with new formats, sales growth is likely to be modest, constrained by supply chain pressures and cautious consumer spending. Primark’s focus remains on value-led fashion, but its exposure to discretionary categories and lack of online sales channels may limit upside during promotional peaks like Black Friday.
Together, these retailers illustrate the varied landscape of UK high street retail heading into the final quarter of 2025. While Next is capitalising on momentum and competitive advantage, M&S is regrouping for recovery, and Primark is navigating structural challenges in a value-conscious market.
Other high street bellwethers are tailoring strategies to capture seasonal demand. Tesco: the UK’s largest retailer is focusing on price competitiveness and loyalty incentives heading into the festive season. Analysts expect Tesco to lean heavily on its Clubcard Prices and Aldi Price Match campaigns to retain value-conscious shoppers. While food inflation has eased, Tesco is preparing for volume-driven growth, especially in grocery and seasonal categories.
Sainsbury’s: Sainsbury’s is expected to benefit from its dual-brand strategy (Sainsbury’s and Argos), with Argos playing a key role in Black Friday promotions. The retailer is investing in digital fulfilment and click-and-collect capacity, anticipating strong demand for toys, electronics, and homeware. Analysts forecast modest growth, supported by its Nectar loyalty programme and expanded seasonal ranges.
John Lewis Partnership, including both John Lewis and Waitrose, is also cautiously optimistic. John Lewis is banking on exclusive product lines and experiential retail to drive footfall, while Waitrose is expected to perform well in premium food and gifting. However, the partnership faces ongoing margin pressure and is focusing on cost control and operational efficiency.
Boots is preparing for a strong Q4, with expanded gifting ranges and early promotions. Boots is expected to benefit from increased demand in personal care, wellness, and fragrance, especially during Black Friday and Christmas, investing in omnichannel integration, with improved app functionality and delivery options.
These retailers are navigating Q4 with tailored strategies: Tesco and Sainsbury’s are doubling down on value and convenience, John Lewis is focusing on differentiation and service, and Boots is capitalising on seasonal health and beauty demand. While the outlook remains mixed, each is positioning to capture cautious consumer spend through targeted promotions and operational agility. While high street retail enters the festive quarter with renewed momentum and aggressive promotional strategies, the outlook remains mixed. Retailers will need to carefully manage pricing, inventory, and marketing to convert cautious footfall into meaningful sales amid ongoing economic uncertainty.
Q3 casualties: Restructuring and retail retreat ahead of the festive quarter
Despite a number of key high street operators employing strategies to best capture spend of the critical festive trading period, Q3 has not been without its casualties. A handful of major UK leisure operators undertook restructuring to avoid collapse amid rising costs and weak consumer demand. On 10 September, Revolution Bars Group announced the closure of 25 venues—reducing its estate from 90 to 65 sites—alongside a £12.5 million equity raise and rent renegotiations to deliver £3.8 million in annualised savings. Prezzo, continuing its downsizing strategy, confirmed further closures following its April 2025 decision to shut 46 restaurants and cut 810 jobs due to soaring food and energy costs. Meanwhile, Buzz Bingo entered a Company Voluntary Arrangement (CVA) in late September, closing nine halls and securing revised lease terms to preserve its remaining 82 venues. These moves reflect the sector’s urgent efforts to stabilise operations ahead of the critical Q4 trading period.
Bodycare is the most high-profile high street operator to fall foul of an insolvency procedure. After initially announcing the closure of 32 stores and 450 redundancies in early September 2025, the brand’s administrators confirmed that the 56 remaining stores will also shut by the end of November, bringing the total number of closures to nearly 150 across the UK. The decision was made due to unsustainable operating costs, stock shortages, and a failed rescue effort, which rendered the business no longer viable.
Signals of strength: Core metrics defy disruption
Despite targeted closures and operational changes among restructuring brands, core indicators such as footfall, vacancy rates, and retail rents have remained resilient and stable. This suggests a high street that continues to adapt effectively—supported by a mix of diversified tenancy, engaged local communities, and flexible leasing arrangements that help absorb shocks and maintain vitality.
In fact, vacancy across both asset classes remains stable. High street voids currently stand at 13.5%, while shopping centre vacancy is at 16.5%, according to Green Street. This reflects a continued quarterly decline of 0.1 and 0.4 percentage points, respectively, with YoY reductions of 0.5 points for the high street and 1.2 points for shopping centres.
Overall, acquisitions have slightly outpaced disposals across both asset classes on a national level. This suggests that current market activity reflects typical turnover—driven by the shifting performance of individual operators—rather than indicating any broader financial distress or systemic pressure.
Footfall performance has been mixed, reflecting a temporary pause in activity ahead of the golden quarter rather than a structural shift in consumer behaviour. Weekly data from MRI shows that average footfall on high streets and in shopping centres rose YoY by 4.2% and 1.0%, respectively, in the first week of October. However, by the final week of the month, this had reversed to declines of 7.5% and 1.4%, respectively.
Despite this volatility, overall average weekly footfall growth for the quarter remains marginally positive (Figure 2), with high streets up 0.5% and shopping centres up 1.0% compared to the same period last year. Retailers are now turning their focus to Black Friday and the festive season to reignite momentum seen earlier in the year. With promotional activity ramping up and seasonal demand building, there is cautious optimism that footfall will rebound as consumers re-engage during the peak trading period.
Rental resilience and market polarisation: Prime assets lead amid shifting demand
In prime retail centres, low vacancy rates and strong competition continue to support rental growth. PMA’s Prime Town Centre Zone A rents across the major cities they track has seen 7% growth since mid-2024, with Regional Centres and Average Resilient Towns seeing growth of 2%. In fact, limited availability in these locations is prompting some brands to explore secondary sites; however, rental uplift in those areas is less likely until vacancy levels begin to tighten.
Encouragingly, Savills in-house data on open market lettings and regears continues to signal resilience. Average headline rents across high streets and shopping centres reached £28.53 in September (four-quarter rolling), reflecting a 2.4% uplift from Q2. While this marks a slight slowdown from the previous quarter, it remains in positive territory—underscoring sustained competitive tension despite fiscal headwinds, particularly in well-let locations where occupier demand remains strong, and to which Savills transaction activity is naturally skewed.
Looking ahead, we may see an increasing divergence in rental values between prime assets and more challenged secondary locations. Operators are adopting a sharper strategic lens when reshaping their portfolios, and assets exposed to elevated vacancy are at risk of further softening. The pricing polarisation evident in the investment market is firmly rooted in occupational performance disparities—especially around rental tone and void rates—which will likely deepen as landlords and tenants respond to evolving demand dynamics.
UK retail investment market
Both shopping centre and high street retail investment markets remain stable in 2025, supported by strong investor appetite, resilient pricing, and improving occupational fundamentals—though deal flow is slow amid economic uncertainty and structural shifts in capital allocation
Shopping centre investment
The shopping centre investment market has shown relative resilience in 2025, despite a quieter transactional landscape and geopolitical headwinds. While the explosive growth of 2024 has not been replicated, core fundamentals remain intact, supported by strong investor appetite, a rebounding debt environment, and a steady pipeline of quality assets.
Transactions have totalled £874.5 million year-to-date across only 16 deals. From Q1 to Q3, volumes reached £796.2 million—only 71% of the total achieved over the same period last year. Full-year volumes for 2024 are therefore expected to fall significantly below the eight-year average of £1.3 billion (47 deals annually).
Momentum at the start of 2025 was promising, driven by expectations around the scale and quality of assets coming to market. Initial forecasts projected volumes could reach £2.5 billion by year-end. However, unforeseen geopolitical developments—particularly the reintroduction of US tariffs under the Trump administration, inflationary pressures, and anticipation around the UK Budget and fiscal policy—have dampened sentiment and delayed several large-scale transactions.
Q1 2025 was historically weak, with just £19.5 million transacted across two assets—the lowest quarterly volume on record. Although Q2 saw a recovery, total H1 volumes reached only £424.4 million across eleven deals, representing 46% of H1 2024 volumes and just 36% of H2 2024.
Despite the slowdown, the issue appears to be supply-driven rather than demand-led. Investor appetite—particularly for prime and super prime assets—remains strong. However, the market is constrained by a lack of available product, especially in the £100 million-plus bracket. Many institutional owners are choosing to hold assets, potentially anticipating improved pricing conditions as interest rates ease.
A steady pipeline of deals is emerging however, but pricing expectations remain a key friction point. Sellers’ aspirations—particularly for better-quality assets—are often misaligned with market reality, creating a standoff between vendors and buyers. This applies to both full asset sales and stake disposals. In some cases, pricing gaps may be bridged depending on the merits of the scheme, its geography, strategic positioning, and regional hierarchy, which ultimately influence yield and achievable pricing. In other locations, however, there is a clear impasse between buyer and seller expectations.
Encouragingly, the debt markets have rebounded. Financing concerns have largely dissipated, with improved loan-to-value ratios and reduced debt costs making leverage more attractive. Debt availability is now outpacing capital market activity—a reversal from recent years and a positive signal for future liquidity. High-quality asset managers and well-positioned parties are securing favourable terms and being encouraged to proceed.
This resilience was evidenced in October 2025, when Unibail-Rodamco-Westfield (URW) acquired a 25% stake in Edinburgh’s £1 billion St James Quarter from Nuveen Real Estate, joining majority owner APG. The deal encompassed the retail galleria, the W Edinburgh Hotel, and the 152-apartment New Eidyn development. URW will manage the asset and rebrand it as a Westfield destination in 2026, leveraging its global retail platform and in-house media agency, Westfield Rise.
At the smaller end of the market, sub-£25 million schemes continue to trade steadily, forming the backbone of the sector. For standard stock, the usual buyer pool remains active, with a splattering of new entrants, including Middle Eastern capital and private equity. However, there is no influx of new institutional money. Assets may have been priced with institutional interest in mind, but current demand is being driven by core-plus, private equity, and quasi-fund investors.
Yield performance in 2024 mirrored the uptick in investment activity for that year. Despite rising 20-year gilt yields, shopping centre pricing stabilised across all subsectors. Super prime yields hardened by 50 bps over the year, with Savills super prime equivalent yield reaching 7.75% by year-end.
This trend has continued into 2025. In Q2, town centre dominant yields compressed by a further 25 bps on top of the 25 bps seen in Q1, while prime yields moved in by 50 bps by the end of Q2 also. Further hardening may depend on the successful sale of larger assets, but notably, yields have not softened despite global economic uncertainty and vendor hesitation. In fact, Savills super prime has hardened even further, reaching 7.25% at the end of Q3.
Investor behaviour is evolving. High-net-worth individuals and institutional buyers are increasingly focused on strategic asset acquisition, sometimes irrespective of broader market dynamics. This signals a potential shift toward conviction-led investment, particularly in the core-plus segment.
While the institutional surge witnessed in 2024 has not been repeated, demand remains steady, with institutional buyers still accounting for 66% of total capital value transacted year-to-date in 2025, compared with 68% across the full year in 2024.. Buyers are acquisitive, buoyed by ongoing rental growth and the relative stability of the sector. However, many remain cautious, awaiting clarity on the impact of Trumpanomics and UK fiscal policy before committing to larger plays.
On the occupational side, restructuring among major retail operators continues, but the market has shown resilience. Prime schemes are generally able to backfill vacant units, and in some cases, landlords are proactively reclaiming units in fully let schemes to reset rental evidence and drive growth—a tactic reminiscent of the retail warehousing sector.
Operational cost pressures—including changes to National Insurance and the National Living Wage—are weighing on low-margin retailers and leisure operators, potentially leading to further insolvencies. These challenges are not rent-driven but reflect broader cost inflation, with rent often being the only controllable expense, which can add to the hesitancy of some potential purchasers.
High street shop investment
The high street shop investment sector continues to operate in a stable and income-driven manner, with pricing remaining robust and investor sentiment broadly positive. While market activity is slow, a modest increase in stock—particularly of reasonable lot sizes—is finding a marketplace, albeit with gradual progress on deals. The prevailing mindset among sellers and investors remains cautious, shaped by economic uncertainty and upcoming Budget implications.
MSCI’s RCA data reflects the sector’s steady performance. Q2 urban retail and high street investment transactions totalled £196.5 million—just 27.2% of the ten-year quarterly average. However, Q1 to Q3 2025 recorded a combined investment volume of £1.6 billion, marking a 16.1% increase on the same period in 2024. Market activity remains constrained, shaped more by limited stock availability than by external economic fluctuations.
Institutional owners continue to act as the primary source of assets, particularly in light of structural changes within defined benefit pension schemes. Sales are being driven not by a negative view of the sector, but by shifts in fund mandates. Smaller segregated mandates are either selling down or being merged, with resulting lot sizes often too small to remain relevant to the fund. This structural reallocation of pension fund capital is the key driver of supply—not sector weakness.
Despite this, many institutional owners are choosing to retain holdings due to attractive income returns, contributing to the constrained supply. Importantly, there is no overarching “sell the high street” narrative. Instead, the sector is experiencing a gradual and orderly release of assets, reaffirming a ‘business as usual’ sentiment.
Investor appetite remains strongest at the sub-£3 million lot size, where demand is consistently robust. However, the market is increasingly being tested at the £10 million level. While in the recent past this segment faced a limited buyer pool, its relative value is now being recognised by larger-scale and institutional investors. A £10 million asset often offers significantly more yield than a comparable £2 million shop, due to reduced competition and pricing inefficiencies—an opportunity that is beginning to attract pension fund capital.
Institutional buyers are starting to re-enter the market, particularly at the £10 million-plus level. This is not yet a wave, but a noticeable emergence. The discount associated with larger lot sizes is becoming more visible, and strategic investors are responding.
One notable source of demand is SCPI (Société Civile de Placement Immobilier)—a French real estate investment vehicle that pools capital from multiple investors to acquire and manage property portfolios. SCPIs operate similarly to syndicated funds, allowing individuals to invest in real estate without owning physical assets. They are not listed on the stock exchange, unlike REITs, and are managed by professional asset managers. SCPIs have been active in the UK market, particularly between the £3 million and £10 million lot size range, and their presence cannot be overlooked.
Occupational market conditions remain strong, with stabilised vacancy rates and pockets of rental growth—especially among prime assets. Rack-rented properties continue to offer compelling income returns, often making debt costs accretive and enhancing achievable yields.
Savills anticipates a modest uplift in capital values, particularly as more assets qualify as prime. This is supported by a benchmark equivalent yield of 6.5%. For current and prospective investors, the recommendation is to remain confident. The occupational environment continues to improve, and well-positioned assets offer generous returns, reinforcing the market’s resilience and long-term value.
In conclusion, the high street investment market remains stable, underpinned by solid demand, structural shifts in capital allocation, and attractive income returns. While deal progress is slow and cautious, pricing has stabilised and the sector continues to offer compelling opportunities—particularly for strategically minded investors attracted to income return and long-term performance.