Unprecedented demand throughout the supply chain
Retail parks are undoubtedly the ‘flavour of the month’, and appear relatively immune to many of the headwinds facing traditional retail. This is partly due to the crucial role played by retail parks in omni-channel supply chains, in terms of traditional stores, distribution hubs, click and collect and returns (and even for Head Office). As Tim Vallance, Executive Director, Capital Markets UK & EMEA comments, “Retail parks have become a vital part of the fulfilment journey and the one channel that works for both retailers, in terms of profit, and consumers, in terms of convenience. You can sell and deliver from retail parks, you can only deliver from sheds.”
But is this a sustainable trend, and will retail parks retain their allure for consumers, retailers and investors alike? Certainly from a consumer perspective, a rise in suburban neighbourhoods, a drive for convenience and consumer spending growth will likely drive long-term outperformance in retail park assets. We explore some of these consumer tailwinds below in further detail.
Supportive demographics: Growing UK population supports retail spend
A growing population (particularly in suburban areas) supports retail spending, and provides retail parks and retailers with opportunities to tap into rising levels of consumption. Stronger growth in new household formation will drive the demand for home products, with these occupiers often located in retail parks. Other benefits include higher operational efficiency and economies of scale.
Category strength: Spending growth to continue, notably in key retail park categories
Population growth will drive overall consumer spending growth, and also benefit categories weighted towards the retail warehouse market. Many retail categories common to retail parks are anticipated to see solid growth in physical retail spending in the coming years (notably household furnishings, household appliances and eating out). Sustainability is expected to drive demand for DIY-products and energy efficient goods, in particular.
Online maturity: Online sales-growth now at manageable levels, click & collect key driver of future growth
The UK retail market has weathered the storm of online retailing, with online growth levels now at much more manageable levels. Occupiers are now more knowledgeable in multichannel retailing and how business models need to support both off and online channels. Notably, click & collect is becoming the engine for overall (and online) sales growth. Retail park locations allow easy access for click & collect facilities with extended trading times, and are not constrained by urban parking challenges and cost.
Footfall outperformance: Retail parks benefit from robust footfall, and strong conversion rates
Growing suburbs, working from home and a drive for convenience culture has led to an increase visitation to retail parks. This trend pre-dates COVID, with shoppers embracing plentiful parking, greater convenience and an increasing variety of outlets. Retail park occupiers also benefit from a higher percentage of customer visits which convert into sales.
From an occupier perspective, increased demand for retail parks and a sustained undersupply is creating rental tension, which should continue over the short- to-medium term. These and other occupier trends are generally supportive of the retail park sector.
Expansive occupier base: Robust retail park demand from a diversified base of expanding occupiers
Retail parks have seen a wide range of occupier take-up. Homewares, bulky goods, food and leisure retailers have been active in 2024 and the early part of 2025. Retail parks significantly outperform other locations in terms of openings and net closures. This outperformance actually pre-dates the pandemic, with the number of chain retail park outlets only 3% lower than a decade earlier, compared with 25% fewer outlets in shopping centres, and almost 30% fewer on high streets.
Low risk occupiers: Wide-based and financially strong occupier profile
Looking at tenant credit rating across the UK real estate market, the retail park occupier base scores extremely highly. Strong, well capitalised occupiers provide limited income risk for investors with relatively few tenants at risk of long-term business failure. In addition, the tenant mix on retail parks is evolving away from comparison goods towards convenience and leisure, sectors with relatively robust outlooks.
Low vacancy: Retail park vacancy the lowest of retail sub-sectors
While statistics vary, retail park vacancy rates remain low, and spatial vacancy has remained below 10% for the past three years, the lowest of the retail sub-sectors (according to data from Local Data Company). The MSCI retail warehouse void rate is also the lowest of all UK CRE segments (with the exception of supermarkets). And according to the latest research by Trevor Wood Associates (TWA), the retail warehouse vacancy rate fell to 6.0% at the end of Q2 2025, compared to 6.4% at the turn of the year and 6.2% at Q1 2025, as retailers continue to take advantage of the amount of second-hand supply available in the market.
Low costs: Rebased rents and low occupancy costs, with growth forecast
COVID disrupted the long-term rental stability inherent in retail parks, causing rents to fall in the UK market. Post-pandemic recovery has been hampered by inflation, which has squeezed disposable income levels and limited the potential for a swift rebound in rents. However, as real disposable income levels are forecast to grow, low voids and increased demand will put upward pressure on rental tones.
Limited supply threat: Supply constraints mean retail parks positioned for strong rental growth
The UK market has seen minimal retail warehouse space added in the past five years with completions as a percentage of stock remaining below the office and logistic sectors. Retail warehouse space contracted during 2024 as assets were demolished or converted to other uses. Supply constraints remain, with limited current activity in the pipeline.
For investors, demand has rebounded back to the retail park sector due to the attractive yield, diversified and stable income, along with strong return potential. We explore some of these investor tailwinds below in further detail.
Consistent volumes and demand: Retail warehouses the preferred retail format for investors
Retail warehouses made up 32% of retail transactions in 2024, remaining a key component of the retail investor landscape. The UK leads the resurgence in investment for retail warehousing, with volumes growing 48% YoY to €3.0 billion in 2024. Retail warehouses remain the most preferred retail format among investors in 2025 - investor sentiment for UK retail warehouses is at the highest level since the early 2000s.
Attractive yields: strong recent recovery in yields, but latent value remains in the market, and lower volatility
UK retail warehouses have seen a strong recovery in yields towards the latter end of 2024, but the prime yield remains 125bps higher than the peak market in 2015 indicating potential for strong risk-adjusted returns. Prime retail parks currently offer attractive pricing compared to other real estate assets, with higher returns than those of prime offices, logistics, most residential and alternatives. Since 2007, retail park yields have demonstrated lower volatility across Europe than other sectors. Lenders have become more open to financing high-quality retail parks as these assets may provide fewer income coverage issues in most markets.
Outperformance: Retail warehouses have outperformed recently, and forecast to continue
Values started to increase in 2024, retail warehouses are now the top performer with offices lagging. Over the past ten years, retail warehouses have a strong track record of strong income return and low vacancy versus other segments, representing a strong investment thesis. The outlook is for the outperformance to continue, with retail park total returns forecast at 8.6% p.a. over the next five years, the top performer ahead of industrial at 8.3% and shopping centres at 8%.
Asset management: Defensive, flexible and potential untapped latent value
Investors can reconfigure retail park space more easily than in a traditional shopping centre, at a lower cost. In addition, they benefit from lower cost of fit-out. Asset management and place making have been limited to date in the retail park sector – there is significant scope to increase experience and convenience, which will enhance dwell time and spend. Retail parks are also potentially easier to extend with hotel, residential or leisure space than other locations, providing potentially untapped latent value.
Strong ESG credentials: Retail parks are low energy users, and provide opportunity to drive further ESG gains
Retail parks already ‘score well’ in terms of current energy usage and intensity (the lowest range amongst commercial property types). There is the additional opportunity to enhance retail park sustainability returns through deliverable asset management to include energy auditing, health and wellbeing assessments, EV chargers, smart grids and community engagement.
Final word: Compelling case for retail park investment
The retail warehouse sector provides investors with the opportunity to access improving retail market fundamentals in liquid lots sizes, which have strong, stable and diversified income. Retail parks are highly attuned to consumer trends, and provide omnichannel retail opportunities, higher income returning assets, low capex and sustainable compatible real estate. As a result, well-positioned retail parks represent an increasingly attractive investment opportunity. These assets can play a significant role in meeting investor demands for defensive retail products, making them a compelling option in today's real estate market.
For further information, please get in touch with:
Tim Vallance
Jonathan Heptonstall
Colin Burnet
Peter Ramsbotham