European retail parks have matured from a fragmented niche into a core institutional asset class, writes Joe Vullo
‘Antifragility’ is the principle that systems improve through volatility or stress. This notion – that pressure can create value – could be applied to retail parks over the last few years, the global pandemic and persistent geopolitical headwinds having vastly changed consumer preferences, reshaping the role of retail parks today.
To explain this, we need to rewind to 2020, when governments first introduced lockdown measures to control the spread of Covid-19.
Before then, retailers generally ran lean supply chains, but were heavily exposed to upstream risks. ‘Just in time’ inventory policies meant keeping costs low by carrying limited stock that moved through the supply chain with speed.
That is, at least, until the pandemic, which introduced severe friction into supply chains as wholesalers slashed production capacity amid factory shutdowns, labour and material shortages persisted, and transport routes were disrupted.
Yet consumer demand remained strong, putting additional pressure on retailers to deliver on, arguably, even shorter time frames than the pre-Covid era.
At the same time, those same retailers were dealing with higher quantities of online orders, so delivery numbers rose in parallel as a large proportion of spend was forced online due to lockdowns putting supply chains and distribution networks under immense pressure.
Empty supermarket aisles and ‘out of stock’ notices on retailer websites caused by the shock to traditional supply chain models and ensuing mismatch between product demand and supply were key factors that instigated a profound shift in retail distribution, from a ‘just in time’ model, to ‘just in case’.
Another was underpinned by technological advances and the rise of e-commerce as consumers were largely banned physically from all but essential retailers.
Of course, online shopping existed before the pandemic, but it accelerated in the years immediately afterwards, climbing to record highs in most European countries (although is now largely plateauing) with a broader acknowledgement that the physical store and online platform are strategic partners, working hand in hand.
Collectively, these shifts have in turn worked to influence a review of the standard approach to logistics and distribution networks given exposed vulnerabilities. Under significant pressure, retailers scrambled to find sustainable solutions to manage stock, to buffer against supply shocks, and to process and fulfil customer orders on shorter delivery times.
As retailers assess their supply chains from end-to-end given the disruption and change in consumer behaviour, retail parks have come into their own. After surfacing from an unprecedented period of uncertainty, retail parks have evolved from a relatively unloved sector to one characterised by supply shortages as interest has risen sharply, and vacancy has fallen dramatically.
At the same time as delivering a flexible, more affordable option to retailers whose margins were being consistently squeezed, retail parks are today offering value as a central element to its consumer proposition, in a convenient format and have evolved into semi-quasi logistics hubs integral to the click-and-collect service most retailers offer now as well and facilitating the returns process, providing the added advantage of driving higher footfall to physical units.
As physical and online consumption are increasingly recognised as symbiotic, physical retail units are also seen as an essential part in the multi-channel ecosystem, prompting fresh investment into bricks and mortar. Retails are also using their assets as a strategic part of their distribution and storage networks – a trend that we at Columbia Threadneedle have seen intensify post-pandemic.
Country-specific investment strategies aside, I would go as far as to say that – at a pan-European level – retail parks are ripe as a scalable investment proposition. From a top-down perspective at least, the UK, the largest and most mature market across Europe, followed by Germany and France, then the Netherlands, the Nordics and Southern Europe, are now more harmonious markets for investors than they have ever been.
From a behavioural perspective, markets across Europe are converging on the same model of click-and-collect and drive-in services with asset and specification requirements that are similar across these geographies.
While there remain nuances; French retail parks being larger and more diversified, while German variants are more functional focusing on essential goods, there is a clear trend towards homogeneity that makes this investment category easier to deploy capital into at scale.
Answering the question ‘why now’ has other tailwinds that are occupational, as well as purely driven by adaptation. For example, the rise in pan-European retailers, such as Aldi and Lidl, which are seeking uniformity across their real estate portfolio to create operational efficiency, or international e-commerce giants, that are nearshoring their warehousing both to benefit from proximity to end-customers and to mitigate customs and transport risks.
So, too, will ESG regulation shape the sector. Stricter mandates on carbon emissions and building certifications affect the economics of asset specification. Older retail parks offer repositioning opportunities to value-add investors, especially as pipelines are generally constrained, restricted by planning regimes and elevated construction costs.
Retail parks also offer a near-unique opportunity to deliver green energy infrastructure through the introduction of PV and EV charging. This offers exciting additional revenue streams in addition to traditional property rental growth, which has the potential to enhance returns from the sector over the next cycle.
Retail parks in Europe are no longer a residual and fragmented category of real estate, maturing into what should be a core pillar of institutional portfolios. This disciplined growth is reflected in investment volumes in European retail which surged 16% year-on-year to €24.6bn in 2025, with out-of-town formats up 12% to €10.4bn.
It follows that with low quantities of existing fit-for-purpose stock and limited development pipelines coinciding with strengthening retailer demand, institutional investors should prioritise retail parks as part of a diversified real assets portfolio. Doing so may also offer investors some much-needed insulation against value erosion through exposure to functionally relevant real estate in what is – and continues to be – a challenging macroeconomic climate.
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