The report described a market navigating headwinds such as rising organisational costs, strong competition and margin erosion, amid an economic and policy climate which is also creating an element of uncertainty.

Meanwhile, according to Colliers, the sector has never been more polarised in terms of prime yields for index-linked leases, with 10-plus years ranging from 4.20% to 9.50% net initial yield, with this expected to sharpen in 2025 due to anticipated rate cuts and the perceived safety of supermarket investments during economic turmoil.

The report said “positive long-term demographic trends and unprecedented levels of net immigration” had created strong fundamentals for the market.

Volume asset trading saw a steep decline in 2024, with a 48% drop from the year before;  around £1.2bn of food stores traded hands compared with £2.29bn in 2023. The two years had a near identical amount of trades, but the average lot size fell from £46m in 2023 to £19.9m last year.

Despite this, members of the specialist finance market continue to acknowledge the strengths of the sector.

“The grocery sector has always been a defensive asset class, built on everyday demand, long leases, and tenants who pay,” said Duncan Kreeger, CEO at TAB.

What’s interesting now, according to Duncan, is how those fundamentals are holding firm and still pulling in capital, especially with interest rate cuts potentially on the horizon.

“Yes, volumes are down. Supermarket transaction volumes in 2024 fell 48%, and 2025 is tracking the same, but that’s not the full picture,” he said.

“There’s strong demand, but not enough supply. And the stock that does come to market? It’s getting snapped up, often with competitive bids from REITs and institutions.”

According to Colliers, the 2024 figures showed strong demand amid a dearth in availability of large lot sizes. There was just one sale and leaseback portfolio transacted in 2024, totalling £70m, compared with four portfolios traded in the year before, bringing in over £1.1bn.

Other specialist lenders have experienced a rising demand for finance when it comes to this particular commercial asset class.

Michelle Walsh, head of intermediary sales for commercial finance at Together, said: “Together has seen an 8% increase in the number of supermarket and grocery stores that it funded from FY23-24 to FY 24-25 to date.

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“Food and grocery stores do prove to be strong assets; they are often a central part of the UK’s high streets, with many business owners starting with one store and then adding to their portfolio.”

Citing Together’s ‘Cities in Focus’ report, Michelle said while the role of the high street may be changing, 79% of professional landlords felt that retail offered an investment opportunity over the next five years.

According to CBRE, in Q1 2025 the retail sector remained healthy despite rises in national insurance and minimum wage, as well as US tariffs, with vacancies tightening in prime locations. This, in turn, led to aggressive bidding for retailers and rental growth.

Many within the specialist finance market saw the current retail climate and the ongoing issue of limited stock as an opportunity for lenders, with another optimist for the space being Charissa Chang, head of broker sales for commercial mortgages at Allica Bank, who believed the essential nature of supermarkets translated into resilience in volatile market conditions.

She highlighted that Allica had seen strong borrower interest in supermarket and convenience store purchases and refinances, particularly for those with long leases and experienced tenants, with the assets providing lower risk exposure as well as stable income profiles.

“Continued demand for grocery assets, coupled with limited stock, is pushing investors to act quickly when opportunities arise. This plays to the strengths of specialist lenders, who can offer faster, more flexible financing than the big banks,” she explained.

 “As competition grows for prime supermarket assets, we expect to see increased demand for bespoke debt structures — such as bridge-to-term loans and interest-only facilities —  to help investors stay agile.”

Charissa believed that anticipated rate cuts could encourage more refinancing activity, allowing lenders in the specialist finance market to support borrowers looking to reposition portfolios or release equity.

“Generally, I think the market presents significant lending opportunities for those who understand the nuances of this sector,” she continued.

Michelle too saw ample opportunity for specialist finance professionals in the space: “For brokers, working with specialist lenders on cases such as these provides a key opportunity to demonstrate value.’’

According to Michelle, specialist lenders could provide a broader range of finance options beyond commercial mortgages: “Those who are able to take a bespoke approach with broad affordability options, acceptance on varied income types, and financing for non-standard properties are able to assist more customers in their quest to become business owners.”

Duncan expected lenders to play a critical role, as he believed the industry was about to see a wave of refinancing, especially for those who purchased at lower rates, with sponsors looking for agility and smart capital through senior debt, bridging, or whole-loan strategies.

“Here’s the truth: Grocery real estate isn’t just holding up. It’s proving to be a stable, high-performing asset class in the UK,” added Duncan.

“For lenders who understand the space, and know how to price risk, it’s a smart place to be.”