The Best-Returning Sector In UK Real Estate May Surprise You
After years in the doldrums, shopping centres are set to provide the best returns in UK real estate over the next four years, according to a new forecast.
Shopping centres are expected to provide an average annual return of 8.7% between now and 2029, the Investment Property Forum’s quarterly consensus forecast said. The forecast is based on a quarterly poll of investors’ expectations for rental and capital growth in various UK property sectors.
Shopping centres lead the way now, the IPF said, with returns coming in at 9.5% for 2025. From 2026, the sector will be overtaken by retail warehousing, but on average, the 8.7%-a-year return between now and 2029 will beat the 8.3% provided by retail warehousing.
Rents have been growing consistently in the best shopping centres, driven by a lack of supply over the last decade. The investment market has been slow to catch up, but the year is finishing with a flurry of shopping centre deals.
Slightly behind the two main retail sectors is industrial, where average projected total returns are 8% a year, driven by steady rental growth.
Offices are expected to be one of the lower-returning sectors, with an average of 6.9%. Even though West End offices are expected to see the strongest rental growth of any sector, with an average of 3.4% a year between now and 2029, its total return will be 6.9%, just a hair above the City at 6.8%.
