Previously, the retail property sector was considered a crucial indicator of the retail industry’s future trends. The outlook for this sector has been evolving very quickly because of investors’ optimism regarding the current state of the economy’s steady growth potential and profitability. According to Eton Holdings, there have been several occurrences where properties have been reported to have sustained severe damages, but in a lot of situations, that property had been on a fast recovery and was being readjusted at new levels of capital and earnings rates – thus creating opportunities for investors who know how to read the financial figures rather than sensational news.
Between the year 2020 and the middle of 2020, several portions of the UK retail market experienced a decline in capital value (by more than one-fourth of its prior pre-COVID level), while the rents associated with most essential retail formats remained stable and fairly strong despite the overall negative trends. In fact, this degree of separation created very high headline yields, typically quoted in the range of 6%-10%+, which were generally attributable to what has been termed a temporary risk premium (as opposed to a structural decline) for occupiers. Simply put, the capital market “priced the market” first; it has since stabilised, and the debt market has stabilised and now is starting to effect positive returns on income.
Deal flow provides reason for optimism. By Q3 2025, retail investment in the UK totalled approximately £5 to £6 billion ($6.83 – $8.20 billion), with 40 to 50% of retail investment coming from purchasers outside the UK. The selective nature of this return of international capital indicates that investors are focused on the durability of income and not buying anything that looks good.
Where money is being invested reveals investor preferences. Retail parks, convenience-based schemes and supermarket-based assets with leases of 15 years or more and rent reviews linked to inflation appear to have been very strong locations for investment and have exhibited low vacancy rates of approximately 6% at the end of 2025, as footfall and tenant sales have increased at these properties compared to older high street formats. The investment characteristics of these properties are very similar to the characteristics of infrastructure investments, in that both provide steady and predictable cash flow, which institutional investors are attracted to, especially in uncertain times.
However, the market is anything but homogeneous. Locations on the high street that are driven by fashion and discretionary spending are experiencing wide variances in performance, with strong prime streets that are well placed beginning to stabilise, while secondary pitches that are weaker continue to experience structural challenges. Additionally, there are differences in prices across regions; for instance, retail properties in Scotland sell for 50–75 basis points more than similar properties in England, even though they have the same tenant agreements, because of issues related to liquidity and familiarity rather than how well the businesses are doing. It is this divergence, according to Eton, that presents opportunities for selective investors.
In general terms, UK retail has been transitioning away from capital appreciation to income. According to MSCI statistics, at a national level, the majority of returns in the 2024/2025 period can be attributed to income returns rather than capital appreciation, which is about to fall significantly behind. Buyers with a forward-looking perspective must reconsider the definition of “retail” in 2024/2025. Rather than being perceived as a distressed industry, the underlying retail assets should be viewed as a collection of income-generating investments with varying degrees of risk and return. According to Eton, the gradual normalising of prime yields as liquidity improves and the compression of prime yield spreads relative to secondary yields will be as a result of the differences in the quality and relevance of tenants.
Foreign investors who hold outdated views of the UK should understand this clear message: long-term decay cannot be judged based solely on current yield. Carefully read the leases, assess the covenant strength and remain invested in those subsectors that provide cash-flow infrastructure. This will help you see the industry’s position as an opportunity for growth rather than a crisis.
