Retail Commercial Property Market: Key Trends and 2026 Outlook

The retail commercial property sector has undergone significant changes over the past 18–24 months. Despite persistent headwinds, the sector is demonstrating renewed resilience, rising investor confidence, and notable divergence between prime and secondary locations. The retail landscape is being shaped by changing consumer behaviour, investor sentiment, and evolving occupier trends.

Our retail sector team has been gathering and reviewing insights, survey results and predictions from various sources including industry experts and clients and the key themes are summarised below.

Reflections from 2025

1. General commercial retail property overview

Retail property performance improved markedly in 2025, driven by stabilising consumer sentiment and a recovery in retail sales. Reports show that retail sales volumes grew year‑on‑year for three consecutive months in the run-up to Q3 2025, bolstering retailer confidence and supporting stronger leasing conditions.

Vacancy rates continued to fall across the most desirable areas; retail parks recorded particularly low vacancy at 6.1%, and major Central London streets hovered around 5% or lower. This tightening supply, especially for high‑quality space, has led to upward pressure on rents in top-tier retail destinations.

By late 2025, retail emerged as the best performing commercial property asset class in the UK, driven heavily by the continued strength of retail warehousing, with total returns forecast at 8.9% for the year. Retail was also Scotland’s top‑performing commercial property sector in 2025, attracting £717 million in investment through major transactions such as the sales of Braehead Shopping Centre and several regional retail parks.

2. Investor sentiment/Capital markets trends

Investor interest in the UK retail sector strengthened throughout 2025, with international investors contributing to a rise in occupational and investment demand. Major transactions in super‑prime retail—such as stake acquisitions in flagship UK schemes—signalled growing confidence.

More broadly, commercial real estate capital markets saw improved liquidity and falling debt costs, laying the foundations for an income‑driven recovery.

3. Lack of supply

The supply‑side environment tightened across many retail sub‑sectors. Throughout 2025, UK retail inventory remained stable at around 8%, with only marginal increases linked to lingering insolvencies among large‑format operators.

Prime supply remained extremely constrained. There was a widespread shortage of expansion space across retail and other commercial sectors, and this scarcity underpins rental growth expectations for 2026—most pronounced in prime high‑street locations and retail parks.

Secondary locations, by contrast, continued to face underperformance, higher incentives, and pressure to re-purpose for alternative uses such as healthcare, leisure, and residential.

4. Policy and cost pressures

The dual track business rates system is keenly awaited by many for permanent rate reductions. However, larger stores with rateable values above £500,000 face rising costs in 2026.

At the same time, the broader macroeconomic environment—moderating inflation and lower interest rates—is improving operational certainty for retailers and landlords.

Scotland’s commercial retail property outlook for 2026

Several themes from 2025 continue, but we expect the key trends for 2026 to be:

1. Continued recovery in Scottish prime retail

Prime and super-prime retail assets are expected to lead the retail sector’s performance. Rising investment volumes, higher rents, and stronger consumer spending patterns suggest that these assets will remain highly competitive and attractive to investors. Continued rental growth is expected in top locations due to limited supply and robust demand.

2. Ongoing sector polarisation

The gap between prime and secondary retail will widen further:

• Prime: Strong demand, rising rents, low vacancy
• Secondary: Elevated incentives, slower rental growth, or declines; ongoing transition into mixed-use environments

Non-core locations will continue to evolve as landlords seek to reposition assets for alternative uses that complement community needs and diversify income streams.

3. Experiential retail becomes more mainstream

2026 will solidify experiential retail as a standard component of store strategy as consumer preference continues shifting towards spending on experiences over goods.

Retailers are pursuing optimisation strategies focusing on:

• Prime high‑footfall locations
• Interactive environments – with digital technologies and innovative layouts
• Experiential formats (blending retail, leisure, and entertainment)
• Omnichannel integration (online and offline) to enhance customer experience

Put simply, retailers are investing in immersive environments to differentiate themselves and drive traffic.

4. Strengthening global and UK leasing demand

Leasing demand across retail and other major sectors is expected to rise in 2026, supported by lower new construction volumes and improving economic conditions. There will be strong competition for high‑quality space.

Future outlook for commercial retail property

The overall consensus from agents and clients is cautious optimism. A more stable operating environment is expected globally in 2026, with easing trade concerns and positive economic growth forecasts across most major markets. The retail sector has rebounded from recent volatility and now stands on a more stable footing, particularly in prime locations where demand, investment appetite, and rent growth all show strong momentum. Investment market resilience, supply constraints and experiential retail strategies will likely shape the year ahead.

However, divergence remains a defining feature of the UK retail property market. While top-tier assets benefit from favourable dynamics, secondary retail properties require reinvention and repositioning to stay relevant. For investors, landlords, and occupiers, 2026 is being described as a period of selective opportunity—rewarding those who prioritise quality, innovation, and long‑term resilience.

How we can help

If you would like to discuss how this issue might impact you or your business, please contact our Partner, Dawn MacPherson.