Commercial Quarterly Examiner – retail market update Q3 2025

According to October’s BRC Retail Sales Monitor total retail sales increased by 2.3% year on year in
September, compared to growth of 2% in September 2024.

The 12-month average growth rate is 2.1%. In-Store Non-Food sales increased by 0.5% year on year in September, against a growth of 0.8% in September 2024.

Online Non-Food sales increased by 1% year on year in September, against a growth of 3.4% in September 2024. This was below the 12-month average growth of 1.8%. The online penetration rate being the proportion of Non-Food items bought online increased to 37.6% in September from 37.2% in September 2024. This was above the 12-month average of 37%.

However, spending rose more slowly than in recent months as households dealt with the higher cost of food and the possibility of November’s budget bringing higher taxes. Milder weather apparently meant shoppers delayed refreshing Autumn and Winter wardrobes Meanwhile, Electrical sales were elevated thanks to the release of the new iPhone and Apple Watch.

In September, Next plc released its half-year results and prefaced presentation of the results with a warning that the medium to long-term outlook for the UK economy does not look favourable. The UK economy is not approaching a cliff edge, it said, but expects anaemic growth at best. UK online sale increased by 11.1% compared with last year and retail store sales rose by 3.7%. All UK sales growth was 7.9%. Next anticipate that growth in UK sales in the second half of the year will be lower than the first half as consumer spending will be dampened by reduced employment opportunities resulting from April’s National Insurance changes.

John Lewis reported strong first-half sales despite posting a pre-tax loss which it partly attributed to the new EPR levy covering the cost of managing the waste disposal and recycling of its product packaging and higher National Insurance Contributions. It also warned that it expected the macro-economic environment to remain challenging.

Occupational view

• UK retail space availability decreased by 1.4% in Q3, with Retail Park availability dropping by 16.7%.
• London and South East shops show signs of improvement, with increased demand and stabilising rental levels.

The amount of all UK retail space available to let decreased by -1.4% in Q3. Shopping Centre availability rose by 0.5% but Retail Park availability decreased by -16.7% and the availability of traditional shops decreased slightly by -0.2%.

In September 2025 annual take up of all retail space was -10.5% lower than a quarter earlier and -13.5% lower compared to the same quarter last year. However, all retail net absorption rates were positive for the first time in eight quarters. A negative reading indicates that more space is being released onto the market than is being let. The South East retail market is showing signs of improvement, with increased demand and stabilising rental levels. While challenges persist, including high costs and vacancies, there are encouraging signs in areas like Brighton, Croydon, and Worthing.

IKEA has opened a new store in Brighton city centre, offering 2,600 home furnishing accessories and small furniture items for immediate purchase. The store, IKEA’s third city-centre location in the UK. Unibail- Rodamco-Westfield has unveiled Allders Parade, a comprehensive retail and dining destination that will be integrated into the redevelopment of the former Allders department store building in Croydon. The first shops will include Miniso, Sky, Abaci, Isle of Flowers, Coco & Nut, and Meltin’ Memories.

In Q3 Retail Park lettings fell y-on-y by -10.7% y-on-y but were 8.7% higher than in Q3 2024. The amount of Shopping Centre space let fell for the third consecutive quarter by –5.6% y-on-y and were -15.3% lower than the same quarter last year. The amount of traditional retail space let y-o-y decreased by -12.0% in Q3 compared to Q2 and has also been falling for three consecutive quarters.

Grosvenor Estates has reported that retail and leisure lettings are up 10% on the same period last year. New openings include Melanie Grant’s first UK studio, Barnaby Bars by chocolatier Barney Goff and New York designer Adam Lippes’s flagship European boutique. The portfolio’s retail and leisure voids are now 4.5%. On Oxford Street, plans are advancing for the redevelopment of the House of Fraser and BHS former department stores.

More prosaically, by the end of 2025 Aldi plans to open at least 11 new stores and 35 refurbishments, creating 40 jobs per site. The discounter now holds a 10.9% UK market share. Poundland has avoided administration and will embark on a restructuring plan shrinking its estate from 800 to 650–700 stores.

All Shopping Centre market rental values (MRV) have grown by 2.0% in the year to September, up very slightly from 1.9% in June but a strong improvement on growth of -0.4% y-on-y a year earlier. Retail Park rental growth is stronger and reached 3.1% in the 12-months to September, up from 1.4% in June 2024. MRV growth for standard high street shops has also been improving, to 3.0% in the year to September from 0.5%% a year earlier.

Marks & Spencer was the biggest retailer to sign a major lease in Q3, as it agreed to expand its footprint at Merry Hill, the eighth largest shopping centre in the UK. M&S has been at Merry Hill for 35 years and will consolidate two stores into 93,000 sf. and will open in late 2025.

Investment view

• High Street shops and Retail Parks performed strongly, driven by high income returns and a slight re-rating in yields.
• Investment volumes for Shopping Centres increased year-on-year in Q2 as investors continue to seek out opportunities.

High income returns and a slight re-rating in yields continue to drive some strong performance numbers from High Street shops and Retail Parks in particular. However, the indices suggest that yields for Shopping Centres and Central London shops have softened over the course of Q3. This is not the case for prime assets in these segments where yields have been trending stronger. We have seen falls of 25 bps for prime high street shops in the past two quarters
– the first time this has happened for more than a decade. The Prime yield is currently at 6.25%, supported by recent sales in Cambridge and Oxford.

As a result of the de-rating referred to above, Shopping Centre capital growth in the year to September 2025 decreased to 2.5% from 3.1% in June and total returns decreased to 12.4% from 13.0% in June. Retail Park total returns slipped to 10.4% y-on-y in September from 11.0% in June, nevertheless this was a large improvement on performance of 5.9% in September 2024. High Street shops enjoyed a large improvement in performance in Q3 as total returns increased to 9.1% from 7.2% in Q2 and 036% in Q3 2024.

Investment volumes are the quarterly value of investment transactions adjusted for capital growth over the analysis period and provide a measure of transaction activity that is not obscured by changes in value. Retail Park investment volumes increased y-on-y in Q2 by 16.3% to £3.334 billion in 394 transactions or, £3.277 billion in current value terms, from £2.868 billion (£2.808 billion) in 357 transactions in Q1. Shopping Centre investment volumes increased y-on-y in Q2 by 6.1% to £5.373 billion in 118 transactions or, £2.117 billion in current value terms, from £5.063 billion (£1.983 billion) in 129 transactions in Q1. Investment in traditional high street shops decreased further in both Q1 2025 and Q2. Preliminary estimates indicate that All Retail investment volumes decreased by -16.5% to £12.670 billion (£9.171 billion) in 4,727 transactions in Q3.

Q3’s most prominent investment transaction featured Hammerson’s acquisition of the remaining 50% stake in Birmingham’s Bullring & Grand Central for £319m from Canada Pension Plan Investment Board. In 2024, footfall at the Bullring, anchored by the iconic, curvaceous Selfridges store, increased by 3% to 33 million visitors, while total sales rose by 11%, making it the strongest performer in its peer group of super-sized, regional, city centre destination shopping centres.

Global shopping mall investor and developer Unibail-Rodamco-Westfield (URW) has purchased a 25% interest in the £1bn St James Quarter mixed-use scheme in Edinburgh from Nuveen and further Shopping Centre transactions are expected to complete before the end of the year. US real estate investment trust Realty Income has made a bid to buy The Lexicon shopping centre in Bracknell, UK for approximately £160 million from a joint venture between Schroder Capital UK Real Estate Fund and Legal & General Capital. Federated Hermes is reported to be selling the Christopher’s Place retail and leisure estate in St Albans for over £19.3 million. Mike Ashley’s Fraser Group is reportedly planning to purchase the Braehead shopping centre near Glasgow for around £220 million. The shopping centre formerly owned by Intu is now in the hands of the SGS Group, the mall’s lender.

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