Shopping Centres Back in Favour, but the Money Has New Target

Shopping malls can expect crunchy consumer sentiment and tough trading conditions for at least a year ahead, analysts say. But demographics, behavioural and market trends, and constrained supply are making retail a compelling proposition to investors with long-dated strategies. The Urban Developer’s Retail Leaders Forum, held in Sydney on October 20, was told that the strongest opportunities are aligned with areas targeted or projected for population growth. Colliers head of property analytics and economics Gavin Duane said that Australia was “so well-planned. We are so well-planned as a nation”. “We know where our population [growth] is meant to go..we’re still very much focused on the growth suburbs in the outer areas,” Duane said. “Planners, I’ll say they’re the bane of my life, but they’re a great group of people to work with.” Duane said that Australia’s population growth of about 300,000 ayear should represent about 30 new supermarkets annually. Structural support for development opportunities near booming outer-suburban population centres is demonstrated by strong results in the sector. ▲ Deicorp has led its $5-billion Melrose Park precinct with the Melrose Central mixed-use project. Duane pointed to Shopping Centre Council of Australia figures showing retail sales up 3.2 per cent in the year ending June 2026, with specialties leading at 4 per cent. “If you’re talking about investing in retail, I always say that where the jobs go is where you should be investing going forward,” Duane said. The SCCA figures also show 2 per cent growth in foot traffic, and 98.8 per cent occupancy in shopping centres. Duane said that limited vacancy and a thin pipeline would also support performance. “We are not building any space. We are just not building any space…So existing space will become more valuable over time. “We’re just not adding non-food majors. Big W don’t have a new store I know about. Target don’t have a new store. David Jones and Myer don’t have new stores.” ▲ JLL head of retail investments Sam Hatcher [ centre ] said the breadth of interest in retail assets was the greatest that he’d seen. Online shopping has had an impact, but is no longer the boogeyman haunting retail investors. “It’s almost like we’ve forgotten about online sales. No one really talks about it anymore … no one’s scared of online at the moment. “But the key is we know our shopping centres have evolved in terms of direct-to-go online for our supermarkets.” Question marks for mixed-use JLL head of retail investments Sam Hatcher agreed that buyers had been spooked by online shopping and Covid, but were now back on the prowl. “A lot of institutional capital, particularly in Australia but also globally, has been on the sidelines in shopping centres and retail for the best part of a decade,” Hatcher said. “That capital void was largely filled by private companies, investment syndicators and private investment. And now the institutional capital is re-emerging in Australia. “I don’t think I’ve ever seen … deep capital at neighbourhoods, LFR, sub-regionals, regionals and super-regionals [until now]. ▲ The struggles of David Jones were not reflective of the strength in the retail sector, according to analysts. “And that all comes back to undersupply. Existing assets have a lot of rental growth left in them.” Hatcher said that from 2017 through to early 2020, his team was advising clients to focus on maximising housing yield over retail space in mixed-use projects. “Getting rid of Big W or getting rid of Kmart; it was all about how many residential apartments are you able to squeeze onto the site. “But we haven’t included mixed-use schemes in many of our presentations in the last 24 months. It’s all about income growth, and how we can carve up some of those bigger boxes to bring in more mini-majors to make the centre more productive. “Everyone’s so focused on rental growth and potential cap rate compression as a result of repositioning assets.” ▲ Tweed Mall is currently under campaign, with approval for a $900-million mixed-use precinct attached. Speakers agreed that retail is not a quick-flip investment. Tenancy remix and investment may be required before an asset is working, and even a private equity-style churn will need between five and seven years. Retail Strategy Group director Angela Bonnefin said that integrating retail into the ground floor of mixed-use projects can have flow-on effects beyond operating performance and shopping sales. “Top-down design never works,” Bonnefin said. “When you’re left with awkward spaces that haven’t been well thought through … not only does it pull down the value of everything upstairs, but it’s something that you have to live with for a long, long time. “And of course in this market where residential sales have really dropped off, we’re seeing that in projects where we’ve got a very good, clear strategy … it’s certainly making the resi sales teams jobs a hell of a lot easier.”

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Patrick Lau
Tue 27 Oct 26

Shopping Centres Back in Favour, but the Money Has New Target

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