Retail turns corner in 2025 as online sales ‘flatline’
Despite a 17% year-on-year decrease in investment volumes, last year was a “pivotal” one for the sector as retailers redirected significant capital back into bricks and mortar, according to research by Knight Frank.
Having been significantly impacted by the pandemic and a shift in consumer behaviours over recent years, 2025 saw a more “symbiotic relationship” between online and bricks and mortar emerge as capital was redeployed into physical stores amid flatlining online penetration, the research found.
Overall, retail outperformed all other asset classes in terms of total returns, giving investors 9.2% ROI, Knight Frank said. Industrial came in at 9.1% and offices at 3.2%.
Shopping centres and food stores were joint top performers, each delivering +10.2%, “underscoring the increasingly broad-based nature of the retail recovery”, Knight Frank added.
Notable retail transactions in the North West in 2025 included Warrington Council’s sale of a 60,000 sq ft Sainsbury’s in Trafford to Supermarket Income REIT for £33.8m and DTZ Investors’ sale of a cluster of shops in Manchester’s St Ann’s Sq to a private investor for £12m.
The Lanes shopping centre in Carlisle was bought by Adhan Group while the 325,000 sq ft Manchester Fort was sold to PGIM by Nuveen for £90.5m.
Across high street assets, supermarkets, shopping centres retail warehouses, £185m of deals were transacted in the North West. Total retail investment volumes are forecast to reach £5.83bn in 2025, down 17% year-on-year and 8% below the 10-year average, according to Knight Frank.
Will Lund, partner, head of retail in Knight Frank’s capital markets team, said: “With online penetration flatlining and retailers reinvesting in physical space, the narrative around retail has fundamentally changed.
“Shopping centres and food stores are now leading performance across all real estate, while retail warehousing remains the occupational darling.”
He added: “Across the board, retail is a holistically investable sector. We have great confidence that this demand is going to drive a return to decade-high investment volumes in 2026 and we are expecting a busy year across all of the subsectors.”
Improving occupational fundamentals and stabilising pricing are driving renewed investor confidence, with continued growth expected in 2026, according to Knight Frank.
