Europe's retail sector poised for continued growth in 2026 as prime location demand drives market momentum

Europe's retail real estate sector continues to demonstrate strength in early 2026, with leasing activity remaining strong across top cities and prime locations despite lingering economic uncertainties, according to JLL.

Europe's top seven cities recorded a 20% year-on-year increase in notable store openings in 2025, with other major European cities seeing an even stronger 39% rise. This momentum continues into 2026, reflecting sustained retailer confidence in physical store profitability and strategic expansion priorities, driven by improving economics and the critical role stores play in omni-channel strategies.

"Structural market shifts are creating a uniquely favourable environment for physical retail," said Sandra Ludwig, Head of Retail Investment EMEA at JLL. "A constrained development pipeline, combined with sustained growth in physical retail spending forecast to average 3.3% annually through 2030 across 17 key European markets, is driving higher sales densities and retailer confidence in prime locations."

Supply constraints drive rental growth: Strong leasing activity has meaningfully reduced availability of high-quality space in prime locations. Prime high street rents increased 3.6% year-on-year across Europe's top retail cities in Q4 2025, with prime shopping centre rents growing 2.6%. For 2026-2030, prime shopping centre rents are projected to increase 1.7% annually, whilst prime high street rents are forecast to grow 1.8% per year.

Geographic expansion broadens: As space tightens in top-tier cities, retailers are diversifying across major European markets. In 2024-2025, 27% of new store openings involved market entrants, including expanding retailers and digital-native brands opening their first physical locations.

Format innovation reflects market maturity: Retailers are strategically adapting store formats, with larger experiential stores in major cities integrating omni-channel capabilities, whilst more compact formats are deployed in smaller markets to optimise sales densities and mitigate risk.

Omni-channel economics improve store viability: Rising fulfilment costs for online orders due to wage inflation, energy costs, and warehouse rents are making store-based fulfilment increasingly attractive for margin optimisation.

"The wave of leasing activity since the pandemic has meaningfully reduced the availability of high-quality space in the most sought-after locations," said Tjard Martinus, Head of Retail Research, EMEA. "Retailers are competing for available space in prime positions, creating gradual upward pressure on rents, particularly in dominant destinations, tourist hubs, and well-connected areas."

Poland and Germany are forecast to lead shopping centre prime rental growth through 2030, followed by Hungary, France, and Spain. Among high street locations, Prague, Warsaw, Berlin, and Birmingham are expected to see particularly strong rental growth.

"For investors, more opportunities are expected to emerge across secondary cities and format-flexible assets, though careful selection of well-located, adaptable properties remains key," added Sandra Ludwig.