Space has effectively run out on retail parks as Aldi, Lidl and variety discounters have increased their presence, according to Savills.
The vacancy rate stands at just 1.8% once obsolete units and those empty for more than three years are excluded, according to the real estate advisor.
Grocers, and particularly the discounters, have moved in to replace the likes of Homebase and Carpetright, while high build costs and a shortage of land have held back new developments.
“Where the sector was once dominated by bulky goods such as furniture, carpets and electricals, these categories have seen their share of floorspace fall, as growth has shifted towards grocery, discount and value-led operators,” said Savills commercial research director Sam Arrowsmith.
“In particular, discount grocery and variety have expanded rapidly, significantly increasing their presence within retail parks. This re-weighting towards essential and value-driven uses has not only broadened demand, but also underpinned stronger retention, creating a more resilient, supply-constrained market.”
Savills said an acute supply constraint was leading to intense competition for the best units, limiting opportunities for new entrants and expanding retailers.
Unlike other major UK supermarkets, Aldi and Lidl can also legally have restrictive clauses in property deals to prevent competitors from opening nearby. A CMA consultation on extending the rules to cover Aldi and Lidl closed in April, with its decision due in July. The restrictions, designed to protect choice for consumers, already apply to Tesco, Sainsbury’s, Asda, Morrisons, Co-op, M&S and Waitrose.
Iceland chairman Richard Walker has been a vocal critic of Aldi and Lidl’s exemption to the rules, though Iceland is also exempt. In 2024, Walker said Aldi and Lidl were “preventing competition on retail parks in towns across the UK” by using “legal tricks”.
Read more: Sainsbury’s, Morrisons and Iceland demand CMA acts on Aldi and Lidl
Both discounters have ambitious expansion programmes, with plans to open 40-50 stores this year and eventually grow their UK estates to 1,500 sites. Aldi currently has about 1,080 stores and Lidl has over 1,000.
Savills said retail parks were also seeing “exceptionally high levels of occupier retention”, with 91% opting to stay put when leases came up for renewal.
Only 721 lettings were recorded in 2025 compared with a long-term average of 847.
Johnny Rowland, Savills co-head out of town retail, said: “The current market is best characterised by a structural imbalance between supply and demand.
“While lettings volumes appear below trend, this reflects an acute shortage of new and available space caused by a lack of available land, high build costs and challenging appraisals, as well as the general covenant strength of the sector.
“This is creating a highly competitive environment, particularly for well-located schemes, where securing space increasingly requires early engagement or waiting for rare lease events.”
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