From flat trading to focused growth: What 2025 tells us about retail in 2026

UK retail ends 2025 in a familiar but more stable position: resilient in parts, flat in others, and ultimately short of the revival many had hoped the Golden Quarter would deliver.

While the final trading period of the year avoided outright disappointment, it confirmed a pattern that has defined the post-pandemic recovery. Growth is selective rather than broad based, category performance is sharply polarised, and consumer confidence, though improving, remains fragile. For retail property, however, the picture is notably stronger, with physical retail once again outperforming expectations and capital returning to the sector.

December’s Bank Rate cut to 3.75%, alongside Bank of England guidance that inflation should move closer to target by mid-2026, provides some near-term relief. Yet this has not translated into a material uplift in discretionary volumes. Instead, spending patterns reflect caution, with households prioritising value, essentials and selective “feelgood” purchases rather than trading up across the board.

That dynamic was evident in festive trading. The Golden Quarter failed to deliver the seasonal acceleration retailers had hoped for, with overall sales growth barely above flat. Non-food categories, particularly mid-market fashion, underperformed, while consumers continued to channel spend into essentials and carefully chosen gifts. The later timing of Black Friday helped inflate early December sales, but once inflation is stripped out, volumes remained under pressure. Online non-food sales outpaced stores, underlining continued channel divergence, yet the longer-term picture is more nuanced: online penetration has largely plateaued, and…

physical retail has proven more resilient than expected.

Barclays’ consumer spend data reinforces this narrative. Household confidence in personal finances drifted down through late 2025, card spending was marginally negative year on year, and essential spend fell back after earlier inflation-driven growth. At the same time, wellness, beauty and entertainment emerged as relative bright spots, a textbook example of the “lipstick effect” reasserting itself. Festive trading, then, was neither a collapse nor a comeback.

It confirmed a two-speed retail economy in which…

value-led and experience-driven categories continue to outperform,

while discretionary mid-market retail struggles to find momentum.

Electricals and tech saw positive year-on-year performance driven by gifting cycles and omnichannel integration. Value-led food and FMCG captured a greater share of festive spend as households prioritised celebrations at home, while books and culture continued to expand, supported by strong late-December trading. From a property perspective, these categories deliver superior sales density, footfall uplift and dwell time, making them central to tenant-mix planning as the market moves into 2026.

Against this backdrop, retail property has emerged as one of the strongest performers in the UK real estate market. Retail delivered sector-leading total returns through 2025, outperforming industrial and office assets and surprising many investors who had written off the sector only a few years earlier. Shopping centres and food-anchored schemes led the way, supported by experiential repositioning, stronger leasing activity and the stabilisation of occupational markets.

Investor demand for retail assets is now at a decade high, with sentiment materially improved and capital rotating back into physical formats as online growth levels off.

However, shop price inflation, particularly in food, remains sticky, and wage and tax pressures will keep households cautious. Retail sales growth is therefore likely to remain modest, with low single-digit increases masking subdued volumes once inflation is taken into account. The implication for landlords and investors is clear:

performance will be driven less by macro uplift and more by asset quality, category mix and operational execution.

Retail property is forecast to retain its sector leadership on returns in 2026, with food stores and well-positioned shopping centres continuing to outperform as vacancy rates move back towards pre-pandemic norms. Retail warehousing remains a relative safe haven, benefiting from strong occupier demand and low structural vacancy. Shopping centres, meanwhile, are firmly in recovery mode, supported by reinvestment from retailers, capital momentum and a renewed focus on experience, convenience and services. Omnichannel infrastructure, including click-and-collect, returns hubs and hybrid fulfilment, is no longer optional but fundamental to trading resilience.

Yet while retailers have advanced rapidly in their use of data, forecasting and AI-driven decision-making, much of the property sector still relies on lagging indicators and incomplete information. This creates a strategic gap at precisely the moment when sharper insight is most needed.

Kinexio’s Lease Intelligence product addresses that gap by giving landlords access to the same performance metrics retailers use to manage their estates. By surfacing early warning signals, benchmarking categories and quantifying the return on experiential investment, such tools allow landlords to move faster and with greater confidence. As 2026 approaches, the opportunity for retail property is clear. Value and experience will define demand, operational resilience will separate strong assets from weak ones, and data-led decision-making will be essential in navigating a two-speed retail market.