Five years ago, European retail real estate was written off. E-commerce was going to empty the shopping centres, the pandemic had shut them, and retail’s share of European property investment fell to around 10% in 2021, its lowest point. Few institutional investors wanted to be seen buying a mall.

In 2026 the picture has turned. Over the twelve months to the first quarter, around €37 billion was invested in European retail real estate, about 20% of all commercial property investment, behind offices and logistics, according to BNP Paribas Real Estate. Investment in shopping centres rose 26% to €8.9 billion. Spain stood out, with retail investment up 43% year on year, driven by shopping centre deals such as Islazul in Madrid, sold for €340 million. AEW reports that fund managers’ sentiment towards retail is at its highest level in ten years, and projects annual returns for 2026–2030 of 9.2% for retail parks and 8.6% for shopping centres, against 8.7% for non-retail property.

The asset class that was supposed to disappear is now projected to beat most of the market. The reason matters more than the headline.

Retail is not back because consumers abandoned online shopping. AEW expects e-commerce to keep growing, to around 19% of retail sales by 2030. Retail is back because of price and supply. Values fell so far between 2018 and 2022 that buyers today pay for the income of a shopping centre, not for a growth story. And almost nothing new is being built. Every year without new supply makes the existing stock, at least the good part of it, scarcer.

That explains why the recovery is uneven, and why it should be read segment by segment.

First, retail parks lead. Out-of-town retail parks, with large boxes, free parking and anchor tenants in groceries, DIY and discount, had vacancy of just 3.7% in mid-2025. They are cheap to operate, their occupancy costs are low for tenants, and they work with e-commerce rather than against it, as places to collect orders and return goods. AEW projects the strongest rental growth there, 2.7% a year, and BNP Paribas reports they still attract the largest share of retail capital, €9.7 billion, even after a 9% fall.

Second, shopping centres are a stock picker’s market. Vacancy in shopping centres was 6.1%, higher than in other retail formats, and yields have moved out in France by 50 basis points and in Germany by 30, according to BNP Paribas. That is a repricing, not a collapse, and it is what is attracting capital: dominant centres in their catchment areas, bought at reset values, with turnover-linked rents that rise when sales do. Secondary centres in weak locations remain a value trap.

Third, high streets are the exception. Prime high street investment fell 25% to €7.5 billion, reflecting yields that are already tight in the best locations. The flagship street remains a brand and luxury play, more expensive and more cyclical than the formats driving the recovery.

Here is what the market underweights. The retail comeback is an income story, and that cuts both ways. Projected returns of 8.6–9.2% a year are attractive mainly because entry prices are low and yields are high, not because rents are about to surge. That makes retail resilient in a world of higher financing costs, because the income does most of the work. But it also means returns depend on keeping occupancy and tenants healthy. A retail investment in 2026 is closer to buying a bond with a property attached than to buying a growth asset, and it should be underwritten that way: tenant mix, sales per square metre and occupancy cost ratios matter more than any narrative about the future of shopping.

The implications cut both ways. For investors, retail parks and dominant shopping centres offer one of the few segments where pricing has already reset and new supply is absent. For owners of secondary malls, the recovery will not save weak locations; conversion to mixed use, or exit, remains the realistic option. For Spain, the 43% jump in retail investment shows international capital returning to a market with strong tourism, rising population and few new centres, but it is concentrated in a small number of large deals.

Retail did not come back because people stopped buying online. It came back because it became cheap and because nobody built more of it. That is a more durable reason than any consumer trend, as long as investors remember that they are buying income, not growth.