SHW Q1 2026 Retail Focus – Out-of-Town Retail remains a strong performing sector
Retail warehousing remained a strong performing sector throughout 2025, according to SHW’s Q1 2026 Retail Focus. As the standout performer within the retail sector, with low vacancy rates, supply side constraints and occupier demand led to sustained rental growth in 2025.
The investment market continued to be buoyant in 2025 with over £2bn transacted. Although lower than 2024, investment volumes are in-line with the 10-year average, with returns on retail warehousing averaging 9.8% over the last 12 months. Investment activity focussed on good secondary stock, which can offer a more attractive return, with investors such as Redevco and Realty amongst those looking to capitalise on these opportunities.
Jeremy Good, director of SHW, says: “The occupational sector also remains robust. Vacancy rates remain relatively low at approximately 5%, and those units that came to the market following the failures of both Homebase and Carpetright were acquired by a range of other operators including food retailers, DIY stores, discount retailers and gym operators. We have also seen an increase in strategic acquisition of freehold interests of solus stores by a number of retailers to secure vacant possession for their own occupation at lease expiry.
The acquisition activity across the sector has come from a variety of different operators depending on location. Jeremy continues: “We have seen continued activity on “high street” biased schemes from operators including Next, Superdrug and M&S Food Hall, whilst the discount retailers, in particular Home Bargains and B&M continue to expand their portfolio.”
Although Hobbycraft have announced the closure of a small number of stores reflecting difficult trading in some locations, the supply of units remains restricted. The gym operators continue to seek new space and are increasingly a viable alternative to retailers in a number of locations bringing a different range of consumers to these schemes.
Food retailers have generally reported positive figures for the Christmas trading period with Lidl and Aldi both showing a strong increase in sales. Lidl are now the fastest-growing bricks-and-mortar supermarket in the UK. Other food retailers like Sainsbury’s, M&S, Tesco, Morrisons and Waitrose all saw sales growth, whilst Asda have indicated a disappointing trading period. In a continuing trend, online grocery shopping grew by 9.9% over Christmas with Ocado, in particular, being the beneficiary.
The food and beverage/QSR market has continued its expansion with the focus on the drive-thru sector becoming increasingly competitive for strategic locations. The failure of Pizza Hut has released a range of new opportunities, but many were quickly acquired by other restaurant formats. The fried chicken operators continue to be active, with Popeyes opening its 100th UK store in November and US fried chicken chain Raising Cane’s announcing plans to open drive-thru restaurants in the UK. Coffee operators are still pursuing acquisitions and continue to be large stakeholders in the market. Their preference for smaller units than the food operators can be beneficial on established retail parks where space is already limited and competition is high.
Jeremy concludes: “The retail warehouse sector is expected to remain resilient through 2026, underpinned by strong occupier demand and limited new development. Rental growth should continue, particularly in the drive-thru and discount retail sectors where competition for space is intense. Investor appetite for well-located secondary assets is expected to remain robust, while yields may see downwards pressure if interest rates fall. Overall, the sector offers steady returns and continued appeal for both occupiers and investors.”
For a copy of SHW’s Q1 2026 Retail Focus, which covers out-of-town and high street retail, please contact any member of the SHW team.