Is UK retail dying? Or a fabulous opportunity?

Looking at some of the recent high-profile retail collapses, it is easy to draw grim conclusions about the state of the retail market.

Just in the past year, we have seen the likes of Hobbycraft, Claire’s, Poundland, Pizza Hut and Carpetright either restructured through distressed acquisitions or close down entirely.

These have been big headline cases, and each one looks like another nail in the coffin of physical retail.

But dig deeper and you’ll find that’s far from the case.

In reality, the signs indicate that, far from dying, physical retail is gradually emerging from a period characterised by bloated head offices, disconnected foreign ownership, debt-heavy structures and a dead-end business model that prioritised massive physical estates over any kind of digital penetration.

Despite the worrying state of the UK economy, research continues to show that UK consumers still have appetite for in-person shopping, with sales volume and footfall both rising across physical retail.

Against this resilient consumer backdrop, the ongoing struggles of many physical retailers in fact present a major opportunity for buyers who are committed to the sector to acquire high value businesses and assets at low valuations,

Retail real estate trends provide perhaps the clearest indications that the in-person shopping experience remains a strong draw. During the first half of 2025, vacancy rates have constricted across the retail sector amid rising demand for commercial retail property and the solid performance of the wider industry.

Naturally, retail still faces a broad array of challenges, but 2025 has demonstrated that physical retail is stronger than many had expected and will continue to play a significant role in how people shop.

How COVID shifted retail
The COVID-19 pandemic fast-tracked e-commerce to become a dominant force in retail. According to ONS data, the percentage of total retail sales made via the internet increased from 19.1 per cent in February 2020, prior to the onset of the pandemic and lockdown.

By May 2020, this figure had soared to a then-record 32.8 per cent. Further peaks were to be seen during the second wave of the virus, with e-commerce recording a 37.2 per cent share in November 2020 and a record figure of 37.8 per cent in January 2021.

Since then, e-commerce’s share has plateaued somewhat, with strong seasonal peaks in the 30 - 31 per cent range around Christmas, but crucially always remaining significantly above pre-pandemic levels.

On the physical retail front, there was a notable shift from the high street to out-of-town parks and omnichannel retail settings (i.e. sites that catered to both e-commerce and physical retail, such as through click-and-collect in-store).

There have also been a string of major retail collapses, including The Oasis and Warehouse Group, Arcadia Group, Laura Ashley, Peacocks, Cath Kidston and Joules, among others. Many of these companies had been fixtures of the high street for years, but had paid scant attention (if any) to their e-commerce offerings, with the COVID-19 pandemic simply exacerbating pre-existing problems.

Distressed retail M&A trends since the pandemic have offered an insight into the shift away from purely physical retail and towards e-commerce and omnichannel retail. Many opportunistic buyers (such as high street giant Next) have focused on acquiring the brand and IP of collapsed retailers, often leaving their sprawling physical estates behind.

What’s changed in 2025?
Before examining signs of improving confidence and investment in the retail sector, it is important to acknowledge the many significant challenges the sector continues to face, particularly physical retail.

Retailers are heavily exposed to cost rises relating to wages and supply chains, as well as tax increases with many arguing a 1.2 per cent increase in employer National Insurance Contributions (NICs) is directly to blame for rising consumer prices. Aside from a rising cost base, retailers continue to feel the effects of uncertainty surrounding consumer sentiment, inflation, interest rates and overall economic and geopolitical trends.

There have also continued to be high-profile high street collapses, with major casualties so far in 2025 including bargain retailer Poundland, arts and crafts giant Hobbycraft, Glasgow fashion brand Quiz and, perhaps most notably, health and beauty retailer Bodycare.

However, physical retail has largely held firm in the face of these pressures, demonstrating greater resilience than expected. Last year, the Centre for Retail Research (CRR) forecast that retail store closures during 2025 would exceed 17,000. According to the CRR’s figures for 2025 up to August, though, there have been just under 2,700 stores affected by retail businesses failing.

This can partly be attributed to the sector’s more solid performance in 2025 so far. According to figures from commercial real estate services firm CBRE, retail sales volumes increased by 1.6 per cent in the first half of 2025. While this may seem slight, the increase is significant following stagnation in 2024 and in the face of the sector’s aforementioned challenges.

Despite ongoing economic uncertainty, CBRE credits the sector’s improvement to the boost to household incomes and consumer confidence that have been generated by stronger wage growth. CBRE cites figures from May 2025 which show wage growth (up 5.5 per cent) outstripping inflation (up 3.4 per cent) as emblematic of the improved landscape.

On the retail real estate front, there has also been improvement, with vacancy rates down across retail parks, shopping centres and the high street, according to CBRE figures. These tighter vacancy rates are subsequently creating greater competitive pressure for retail real estate and fuelling rental growth across the industry.

According to RightMove, meanwhile, demand for investments in retail commercial property was up by 35 per cent during the second quarter of 2025, compared with the same period a year earlier.

Andy Miles, Rightmove’s Managing Director of Commercial Real Estate, said that lower interest rates had been vital in making retail real estate more attractive for investors, while decreasing supply levels were also cited as an important factor.

On the high street
Despite bearing the brunt of the struggles that the retail market has seen over recent years, the UK high street is exhibiting signs of improvement in 2025, indicating that it remains an attractive proposition for investors and still has a vital part in the overall industry.

CBRE figures show that high street vacancy rates have continued to tighten, leading to supply becoming more limited in prime locations. At the mid-year point of 2025, high street vacancy rates across the UK stood at 13 per cent, while the regional disparity that remains an issue for the physical retail sector was demonstrated by vacancy rates of under 10 per cent in Central London - a significant gulf from the average.

The growing attraction of the high street is perhaps more starkly shown by retail real estate investment levels, with Rightmove reporting a 56 per cent year-on-year increase in investments from Q2 2024 to Q2 2025. Even more dramatically, figures cited by Savills show an increase of 106.5 per cent from H2 2024 to H1 2025.

According to Michael Sears, NAEA Propertymark commercial advisory panel board member, appetite for retail real estate investments is at the highest since 2021, indicating that there is “still a healthy desire for high-quality retail space across the UK”.

In October, a landmark property in Belfast city centre was brought to market by CBRE NI. Ross’s Court on William Street South comprises a ground floor retail space and vacant upper floors and was brought to market with offers sought in excess of £7 million.

The ground floor units, occupied by retailers Mango and Russell & Bromley, generate annual income of approximately £305,000 and the sale was described by CBRE NI Senior Director Andrew Coggins as a rare opportunity to “acquire a substantial income-generating asset in the heart of Belfast.”

Coggins stated that the property had come to market at an ideal time, with a recent report from CBRE NI revealing retail assets as the top performer in the Northern Ireland market, comprising 78 per cent of total investment spend.

This growing interest from investors has come amid signs of strong overall high street performance. Even before the COVID-19 pandemic, high street retailers were suffering from lower footfall, as shoppers increasingly looked online or to out-of-town retail parks for their retail needs.

However, according to Savills research, high street footfall has increased across every quarter from Q3 2024 to Q2 2025, with rates up 1.3 per cent in the first quarter of 2025 and 1.1 per cent in the second.

While these may appear to be marginal, Savills says that the consistent increases across the course of a year, in the face of economic uncertainty and high costs, highlight the “increasing resilience” of the sector.

From a company M&A perspective, the UK retail sector has had a subdued 2025, despite some emerging activity in niche areas. What activity there has been has, to a large extent mirrored pre-existing trends, in which the brand and assets of distressed retailers have been targeted more than real estate portfolios. A good example of this would be the acquisition of maternity retailer Seraphine’s brand and IP by Next, which has made a string of similar deals over recent years.

One of the most high-profile distressed deals of the year so far (and the previous activity that the buyer has undertaken) could be interpreted as a vote of confidence in the resilience of the UK high street.

When Claire’s UK fell into administration in August following the collapse of its US parent company, it looked like the latest in a long line of collapsed big name brands with bloated physical estates and a lack of e-commerce penetration.

However, the firm was subsequently acquired out of administration by Modella Capital, a retail investment boutique that had previously acquired distressed brands including Hobbycraft, The Original Factory Shop and WH Smith.

While Modella only acquired 156 of Claire’s 306 UK and Ireland stores, this remains a sizeable brick and mortar portfolio. Furthermore, despite the fact that Modella is likely to make further closures, it seems to be making a big bet on UK high street brands and physical retail in general, with the Financial Times reporting that it plans to increase WH Smith’s (now trading as TG Jones) physical store count.

Find out more about Modella’s acquisition of Claire’s UK and what its M&A strategy says about the UK high street in this dedicated insight.

In the most high-profile distressed deal since the Claire's acquisition, there was yet another sign of a renewed focus on physical retail. Beauty retailer Bodycare, which collapsed in September, was acquired by an investment group led by former Body Shop CEO Charles Denton, who announced plans to begin reopening the brand's stores next year.

Retail parks go from strength to strength
Amid the dramatic shifts in the retail landscape over the past decade, one area of the physical market that has not only survived but thrived are out-of-town retail parks.

Providing an attractive mix of retail choice, along with a wide range of food and leisure options, out-of-town retail parks offer many of the things you might have expected to find on a thriving high street little more than a decade ago.

Crucially, however, out-of-town parks typically benefit from lower rents than high streets, enabling retailers to lease bigger spaces for far less. For consumers, meanwhile, the ability to drive and park in such close proximity to such a wide range of shops offers a clear element of convenience that high streets often lack.

Perhaps even more importantly in the current retail market, out-of-town parks are also ideal for delivering omnichannel retail. As well as in-person shopping, the sheer space on offer at out-of-town retail parks also means there are opportunities for warehousing and logistics offerings, meaning that these parks can provide consumers with services such as same-day click-and-collect and in-person returns of online orders.

This enables out-of-town retail parks to tap into the consumer appetite for the convenience of online retail, as well as the more tactile and direct experience offered by in-person shopping.

According to figures from Savills Research and MRI, retail parks are the only area of the industry to see footfall growth every quarter since the end of 2023 and have seen the strongest growth so far this year, with footfall up 2 per cent in Q1 and 2.5 per cent in Q2.

Retail parks have established themselves as perhaps the prime physical retail setting post-COVID-19 and this is a trend that continues into 2025. As per CBRE, retail parks have the lowest vacancy rates of all physical retail segments, with rates seeing a consistent decline since 2021 and sitting at 6 per cent at the mid-point of 2025.

Furthermore, retail parks continue to deliver the strongest investment trends across the sector, while, according to a recent Investors’ Chronicle report, they are the only area of the market to see rental income return to pre-COVID levels.

Retail parks continue to be bolstered by stronger investment in retail warehousing. According to CBRE, retail warehouse investment volumes increased to £1.5 billion during H1 2025, up 32 per cent from the same period a year earlier.

Interestingly, much of this activity is focused on the lower end of the market, perhaps challenging an image of out-of-town parks being the province of bigger retailers. CBRE states that rental growth in the retail park sector is expected to be focused on small-to-mid unit-sizes during H2 2025.

Demonstrating the strong, ongoing interest in prime space at retail parks, CBRE cites the aftermath of the collapses of Carpetright and Homebase - major retailers with huge presences at retail parks across the UK. Since the two companies closed last year, 75 per cent of former Carpetright stores had been taken up by the end of H1 2025, while 85 per cent of Homebase stores had been taken up or were under offer.

Shopping centres see glimmers of hope
Shopping centres are in many ways the area of the retail market that has been left behind the most by changes in the industry, having been hit by plummeting footfall and widespread store closures.

According to a 2024 report from property consultancy Lambert Smith Hampton, approximately 60 of the UK’s 500 bigger shopping centres are set to be demolished, with a further 200 poised to be partially taken down to enable refurbishment, redevelopment or repurposing.

In 2025, shopping centres continue to be badly affected by a spate of store closures, with CBRE figures showing they suffered from the highest vacancy rates and lowest rental growth during the first half of the year.

However, it is not all doom and gloom for these venues, which once proved a dominant force in UK retail. Despite high vacancy rates, they have been on a sharper downward trend than other areas of the market, dropping from 17.2 per cent to 16.8 per cent between Q4 2024 and Q1 2025 alone.

Furthermore, shopping centres have seen consistent footfall growth across the first half of the year, with growth during both quarters outstripping the rate seen on the high street and across the retail sector as a whole.

According to Savills, the shopping centre sector is attracting significant investor interest, with transaction volumes reaching £2 billion in 2024, the highest year-end figure since 2017 and well-above the eight-year average of £1.3 billion.

Savills say that the “scale and quality of assets expected to come to market” meant that this was set to continue during 2025, with projections of £2.5 billion in transactions. However, with investor sentiment dampened by uncertainty over US trade tariffs, just two deals were completed in the first quarter for a total value of £20 million, the lowest quarterly volume on record.

There was a strong recovery in the second quarter, but H1 still saw just £483 million transacted, a drop of 61 per cent from H2 2024. Despite this bump in the road, the outlook for the shopping centre sector is still more positive than it has been for some time, with resilient investor appetite and a strong pipeline of high-quality assets.

For buyers at the small and medium-sized end of the retail market, a resurgent shopping centre sector could offer significant opportunities. With vacancy rates remaining relatively high, there is likely to be less competition for prime spaces than there would be on the high street, which could lead to more affordable rents. The smaller size of units on offer, meanwhile, could make shopping centres more suitable for smaller retail buyers than the far larger sites that are typically transacted at out-of-town retail parks.

Should footfall remain on an upward trajectory, investment continue to flow into the sector and consumer sentiment recover, shopping centres could once again prove a crucial venue for small and medium-sized retailers.

The e-commerce issue
Despite a series of dramatic economic and geopolitical shocks, there is little doubt that the most disruptive force within retail over the past two decades or so has been the rise of e-commerce, particularly since the COVID-19 pandemic.

The rate at which e-commerce grew during and immediately following the pandemic led to some dramatic pronouncements that it could come to completely dominate the retail landscape, potentially even superseding the high street entirely.

However, in 2025 these predictions now appear to have been wide of the mark. While ONS figures show that e-commerce penetration of the retail market is strong and significantly above pre-pandemic levels, this growth has levelled out since 2021.

E-commerce is, no doubt, here to stay and will likely continue to grow, but for many people in-person shopping remains an integral part of the retail experience. According to CBRE’s 2025 UK Consumer Survey, 52 per cent of consumers prefer shopping in-store, while over 50 per cent prefer returning online purchases at physical stores.

Overall, the e-commerce segment of the market appears set to see continuing levels of modest growth and gradually increasing penetration, at least in the medium-term.

However, physical shopping remains at the core of the retail industry, as the strength of retail parks and the emerging signs of recovery on high streets and in shopping centres have demonstrated in 2025 so far. As we head towards 2026, brick-and-mortar retailers and investors in retail real estate have reason to be optimistic about the resilience the sector has shown and the opportunities that improved trading conditions could deliver.

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