Opinion: Out of town retailers race for space in increasingly “sticky” market

By Sam Arrowsmith, director of commercial research at Savills

The out of town retail market is facing supply challenges due to a very limited development pipeline and existing occupiers increasingly looking to remain in situ. With extremely tight vacancy in this market, the challenge is not a lack of appetite for space, but whether a suitable unit will become available at all.

Outside selected roadside food and beverage schemes, drive thru formats and bespoke discount grocery stores, almost no significant new retail park development is coming forward. In a market where space is finite, retailers recognise that giving up representation on a successful scheme could make it difficult to regain that position later.

However, occupational churn in some degree is needed for landlords to refresh tenant line-ups. Whereas lease expiries, relocations and portfolio reviews used to regularly return units to the market, the current market dynamics is limiting opportunities for incoming brands.

Across our Savills deal book of new lettings, regears and renewals, only 8% of occupiers vacated between 2023 and 2026, meaning 92% renewed their lease commitments. When retailers do move, it is typically to rightsize, secure a better-configured unit or improve their pitch within a scheme, rather than leave the market altogether.

The result is an increasingly “sticky” market, with very little churn through which landlords can regenerate tenant line-ups or accommodate expanding brands. There have been just 373 new lettings year to date, around half the 721 recorded last year, which was itself below the 15-year annual average of 847.

Vacancy has also now fallen below 4%, declining from 4.3% at the end of 2025 to 3.9% today. While some of that reduction reflects long-standing vacant space being repurposed and removed from the available supply, it nevertheless leaves retailers competing for a shrinking pool of opportunities.

Ordinarily, this combination of constrained supply, falling vacancy and healthy demand might be expected to produce stronger rental growth. However, net effective rents have increased by only 1.7% year to date, following growth of just 0.1% last year.

This reflects the tension at the heart of the market. Limited availability and strong operator demand are supporting rents, but wider macroeconomic uncertainty, rising occupational costs and continued pressure on consumer spending are limiting the extent to which retailers can absorb further increases.

The picture becomes more complicated at the larger end of the market, where units exceeding 20,000 sq ft have recorded a 10.3% decline in average rents during 2026. This does not point to a shift in demand, but to a change in the quality of stock now being transacted.

The administrations of Homebase and Carpetright released a pool of larger units during 2024 and 2025, many of which occupied strong locations. What came back to the market was a relatively high-quality group of stores, and competition for the best opportunities drove exceptional rental growth.

However, those units have now largely been absorbed, and much of the larger-format space being transacted today is more secondary in terms of location, configuration or condition, which means it does not attract the same depth of competition and is letting at lower rents.

Even after this year’s correction, however, the average rent for units exceeding 20,000 sq ft stands at £13.74 per sq ft, 14.3% above its pre-administration level in 2023. Where schemes are well located, supply is constrained and occupier demand remains deep, landlords should still be able to achieve rental growth.

Alternative uses are also absorbing some of the space that might previously have remained vacant. The rapid expansion of padel is one example, with operators taking larger, lower-rented units that may be more difficult to relet to conventional retailers. This is helping to bring long-standing voids back into use, but it also removes further stock from the pool available to retail occupiers.

The defining story for retail parks is therefore not rental growth alone, but the growing scarcity of suitable space. Occupiers are protecting successful locations, vacancy continues to fall and limited development means there is no meaningful supply pipeline to ease the pressure. Ultimately, for retailers seeking the right unit on the right scheme, competition remains intense.