Australian shopping centres continue to stand out as one of the most resilient and compelling real estate investment opportunities in Australia.  

The sector is being supported by strong household spending, continued population growth, constrained new supply, healthier tenant economics and a stronger transaction market. 

From a macroeconomic perspective, with inflation above target the Reserve Bank of Australia (RBA) has held the cash rate at 4.35% since August, following three increases earlier in 2026.^1,2 At the same time, retail fundamentals have continued to improve, and investor demand has returned.  

For investors, the opportunity is therefore less about forecasting falling rates and relying on cap rate compression, and more about owning high-quality assets with the capacity to deliver sustainable income growth, and in turn drive long term capital appreciation.  

In this insight, we examine the structural and cyclical fundamentals underpinning the sector’s outlook and why well-located shopping centres – particularly convenience-led assets and dominant regional centres – remain compelling additions to diversified investment portfolios. 

Forty years of retail spending growth 

Australia has a long history of growing household consumption, providing a robust demand base for retail property with average retail expenditure growth of +5.5% per annum since 1984 according to the Australian Bureau of Statistics.  

Contemporary data shows this trend remains intact: household spending rose 1.1% month-on-month in July 2026 and was 7.0% higher than a year earlier, the strongest annual growth since June 2023. Growth in July was broad based, with food, health, recreation and culture, and hotels, cafes and restaurants all increasing.³ 

At the sector level, CBRE estimates Australian retail sales are now close to $443 billion, 54% above 2015 levels, and forecasts this to reach approximately $530 billion by the end of the decade.⁴  

This resilience has been tested through multiple economic cycles, including the global financial crisis, the pandemic and the cost-of-living shock. Retailers have adapted through changes in format, pricing, technology and channel mix.  

For landlords, the result is an asset class whose income is ultimately linked to a large and growing pool of consumer spending rather than to a single economic theme. 

A growing population means growing consumers 

Australia entered 2026 with a population of 27.8 million, up 1.5% in the year to December 2025. Net overseas migration contributed 301,000 people over that period, making migration the dominant source of population growth.⁵ 

For retail property, this matters because population growth translates into households, jobs, daily-needs consumption and demand for services.  

Shopping centres also increasingly function as community infrastructure, bringing together supermarkets, health, allied health, dining, leisure and other services. As such, Centres with strong local catchments can benefit from both population growth and the increasing frequency of everyday visits. 

In areas where new households are being added faster than meaningful retail space, existing centres can gain market share, tenant demand and pricing power. 

Constrained supply is becoming a structural advantage 

Australia already has relatively limited shopping centre space per person, and the supply outlook reinforces this scarcity.  

CBRE estimates national shopping centre gross lettable area at around 0.69 square metres per resident, declining to approximately 0.64 square metres by 2030. Around 0.7 million square metres of new supply is forecast across 2026-2028, while Australia’s population is expected to increase by around one million over the same period.⁴ 

The pipeline of new development is also skewed toward smaller neighbourhood centres: around 69% of projected additions to 2028 are expected to be neighbourhood centres, with only ~230,000 square metres across regional and sub-regional centres. Nearly 60% of shopping centres already have vacancy below 5%.⁴ 

Elevated construction costs and scarcity of well-located land make new competing supply harder to justify economically. Development is increasingly concentrated in growth corridors or delivered through extensions and redevelopments of existing centres. For established assets, this creates a moat, as the centre is benefiting from growth in demand in a market where replacement supply is difficult and uneconomic to deliver. 

Online retail evolving the role of shopping centres 

Online shopping is now a mainstream part of Australian retail with Australia Post estimating that 82% of Australian households shopped online during 2025.⁶  Despite this widespread adoption, online sales account for only approximately 12% of total sales, with this number decreasing from its COVID-19 pandemic peak. 

While online is here to stay, it does not mean physical retail is disappearing as the role of bricks-and-mortar stores is ever evolving. Retailers still use their stores for point of sale, but most successful retailers are now omni-channel and increasingly using stores as brand, service, fulfilment and collection points, while customers expect convenience across channels. The strongest shopping centres therefore compete not only on product availability but on accessibility, experience, food and beverage, services and the ability to meet everyday needs quickly. 

This shift also increases the premium on asset quality – centres with dominant catchments, strong supermarket anchors, easy access and a compelling tenant mix can remain highly relevant even as online shopping rises.  

Supermarkets remain the anchor, but the mix is broadening 

Supermarkets continue to provide essential traffic for many Australian shopping centres.  

CBRE estimates 94% of regional and sub-regional centres have at least two daily-needs supermarkets, underlining how central grocery and essential spend are to the modern centre.⁴ 

The strongest centres are increasingly building around this base, complementing with medical and allied health, pharmacies, services, dining, entertainment and other experience-led offerings. Mini-majors now account for around 15% of gross lettable area in regional and sub-regional centres, including retailers such as Chemist Warehouse, Cotton On, JB Hi-Fi and Rebel Sport.⁴ 

For investors, this broader mix is important as it diversifies income, increases frequency of visits and reduces reliance on discretionary retail alone. It also makes the centre more difficult to replicate by new entrants. 

Rents are now moving with healthier tenant economics 

The post-pandemic period produced a meaningful reset in retail rents and asset values.  

This reset has left tenant occupancy costs more sustainable than before 2020, particularly in fashion and services. CBRE reports median occupancy cost ratios in regional and sub-regional centres are around 2.5 percentage points lower than pre-2020 levels in these categories, creating space for specialty rents to grow. Re-leasing spreads in convenience and neighbourhood centres are tracking at mid-single-digit growth, while regional malls have returned to consistent positive growth.⁴ 

Rental growth is increasingly visible in market data. CBRE reported rising net face rents across all retail sectors in the first quarter of 2026.⁷  In addition, the major REITs reported an average positive leasing spread on expiring leases of approximately 4.2% in December 2025, providing further evidence of real rental growth in the retail sector. 

For investors, this combination of rebased rents, improving sales, tight vacancy and limited new supply is important. It increases the likelihood that future income growth will come from genuine tenant affordability and sales performance rather than simply from inflationary indexation. 

The investment market has already begun to re-rate 

Retail was the standout real estate sector in 2025, with approximately $12.7 billion of transactions, nearly 34% above the prior year and the highest annual volume since 2021. Regional, major regional and super-regional centres accounted for around $6.9 billion, a record level.⁸ 

Activity has continued into 2026. In the first quarter, 32 retail transactions above $5 million totalled approximately $1.7 billion, while in the June quarter NSW alone recorded around $1 billion of retail sales. At the same time, yields for shopping centres continued to tighten modestly in quarter one, with regional yields compressing by one basis point and sub-regional yields by two basis points, after further compression in late 2025.^7,8 

CBRE expects unlevered investment returns for regional shopping centres could approach 9% per annum over the medium term, with rent growth the major contributor and only modest further cap-rate compression assumed. Neighbourhood centres have already delivered sector-leading long-run returns of around 9.4% per annum over the 10 years to 2026.⁴ 

A different kind of countercyclical opportunity 

With the RBA Board noting inflation remains too high and the economy still operating above capacity, the RBA increased the cash rate three times this year before leaving unchanged at 4.35% in August.^1,2 

Given an uncertain geopolitical and economic backdrop, the opportunity for investors is to look for assets where rental growth can compound through the cycle and given the expected lack of new supply high-quality, well-located assets will only become more valuable due to their scarcity. 

In this environment, a high-quality centre with defensive cash flow and embedded leasing upside can be more compelling than a lower-quality asset whose valuation depends primarily on yield compression. 

The sector's improving fundamentals are already being reflected in returns. CBRE estimates neighbourhood centres have delivered around 9.4% per annum over the past decade, while its 2026 outlook expects regional shopping centre returns to rise materially as rental growth strengthens.⁴ 

A compelling long-term investment opportunity 

The investment case for Australian shopping centres is supported by key structural themes: a large and growing pool of consumer spending, population growth that continues to add households, very limited competing supply, healthier tenant economics, and a transaction market that is once again providing liquidity to quality assets. 

The sector is not without risks. Online penetration will continue to rise, consumers remain value conscious, labour and operating costs are elevated, and the path of interest rates is uncertain. These factors make careful asset selection and active management more important.  

We believe the strongest opportunities are likely to be centres with dominant catchments, high sales productivity, supermarket and essential-service anchors, low occupancy costs, limited competing supply and realistic opportunities to add value to or redevelop the asset over time. 

We believe well-located, actively managed retail real estate remains capable of delivering attractive risk-adjusted returns through the next cycle.  

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