[+] Shopping Centres Heat Up Across the Board

Cost-of-living crisis? Tell retail investors that. Despite household-budget pressures hanging over the sector, investors have developed an appetite for large-format shopping centres, especially in accelerating markets such as Perth and South-East Queensland. McVay Real Estate managing director Sam McVay says the fundamentals underpinning retail remain steady. “We had 500,000 people move to Australia last year and almost no new shopping centres, so there’s strong demand and it’s continuing to grow,” says McVay, who helped to sell QIC ’s 50 per cent stake in WA’s Claremont Quarter for an estimated $207 million. Headwinds and tailwinds “Retail has experienced headwinds for 15 years,” he says. “There was the GFC which was catastrophic for retail, then fears that online would take up 60 per cent of spend, but it didn’t happen. “Online sales account for about 13.5 per cent [according to the latest figures from NAB ] and they’re starting to flatten versus in-store growth,” says McVay, who worked with chairman Dan McVay and CBRE’s Pacific head of retail capital markets Simon Rooney on behalf of QIC for the Claremont offload. A KPMG retail outlook report this year suggested that while growing online is a business priority for 31 per cent of retailers, this was not at the expense of physical retail, with nearly half (45 per cent) physical and omnichannel retailers planning to open more stores. Discretionary household spending, current price, seasonal adjusted estimate ▲ Source: Australian Bureau Statistics And even Covid wasn’t enough to slow bricks-and-mortar retail. “Covid should have wiped everyone out, but it made them stronger,” McVay says. “So we’ve been through three massive events, which have resulted in lower occupancy costs and lower rent and that’s the kind of tenant and environment you want to invest in.” One of the biggest tailwinds for retail has to be population growth, which seems to make up for any decline in spending on discretionary spending—which the Australian Bureau of Statistics says fell month-on-month by 0.5 per cent in June . Despite the small decline, spend has held relatively steady, and the bureau’s most recent data in fact suggests a slight upward trend in retail turnover, which reached $36 billion in June 2024 , an increase of 2.2 per cent on the same month last year. As you move through various cycles, where consumers spend also changes, McVay says. “So maybe you ’ re going to Woolworths or Coles more regularly rather than eating out, for instance. “Westfield, which is the best operator in the business, has changed its portfolio considerably as a result. It has a lot more proper dining experiences, a lot more experiences and services going in, from laser clinics and medical to mini-golf. “Retail is always evolving and adapting.” The other overlay is that there is almost nothing in the pipeline of new supply for major shopping centres, although smaller neighbourhood centres are gaining some traction, especially those spearheaded by the likes of Woolworths-owned Fabcot and Coles . And this is a blessing and a curse for retail. “Trying to get that much land, a 4ha site in a prime area is impossible, and the cost to build is really high, so investors are still buying retail assets at well below replacement cost,” McVay says. This has made shopping centres an attractive option for investors—when they’re available that is. Investor interest “We’re seeing a really strong level of interest for investors getting into or turning back to retail,” McVay says. “Office is obviously having challenges and global capital wants to be involved in Australia, so it ’ s heading towards retail.” CBRE Head of Capital Markets Research Tom Broderick says that the conversation has tended towards structural changes in office since Covid. ▲ Sovereign wealth fund Future Fund sold its 50 per cent stake in Lakeside Joondalup to Vicinity after years on the market. “But the structural changes in retail happened in the years prior, particularly around rollout of e-commerce—there was concern from the investment community and a softening of pricing then, which means pricing is looking pretty attractive for shopping centres right now,” he says. That’s not to say it ’ s an overseas gold rush. MSCI head of real assets research for the Pacific Ben Martin-Henry says that, traditionally, overseas investors haven’t been interested in Australian retail. “They account for something like 8 per cent of total volumes over the last decade,” he says. “There’s a couple of reasons for that, including that you can’t just set and forget in the way you can with office, give it to someone to manage and leave it. “The other thing is overseas investors like to deploy large pools and we don ’ t have that many large centres and they tend to be very tightly held super prime shopping centres. “They don’t come on the market much but when they do, I wouldn’t be surprised to see overseas investors. It seems to be more of a diversification play.” ▲ Cairns Central was snapped up by Fawkner Property in a $390-million deal in December 2023. CBRE’s Tom Broderick says retail transactions are much more reliant on existing owners and their future strategy, rather than macroeconomic trends. “At the larger end, superannuation funds and bigger property funds are constantly looking to change weightings of portfolios,” he says. “This means they might be looking to sell out of retail to get into something like industrial, or reducing exposure in office and moving into retail, so (there ’ s) always that level of transaction activity of existing assets.” Perth on the up Some of the strongest factors underpinning retail are out in full force in WA and South-East Queensland. According to CBRE, Western Australia recorded more than $1.6 billion in deals completed in the state since 2023. “WA is the first market coming out of this trough,” MSCI’s Martin-Henry says. “It has huge population growth and a big factor is that in both SEQ and WA the cost of housing is better than in Sydney, which continues to climb to record levels and that means people are moving out. “Sydney and Melbourne also don’t have a lot for sale, so there has definitely been more activity in Brisbane and Perth generally.” ▲ Vicinity ’ s sale of Perth ’ s Maddington Central marked the third sale by the ASX operator as it looks to focus on ‘high-quality ’ assets. Added to strong residential growth, high employment (with unemployment sitting at 3.7 per cent in Perth, well below other capital cities) and higher levels of disposable income, retail is strong in these markets. This has translated to deals such as the aforementioned Vicinity acquisition of Lakeside Joondalup as it looks to reposition its portfolio, the sale of Midland Gate to Fawkner Property and PAG for $465 million, Vicinity ’ s sale of Maddington Central for $107 million to Realside and 50 per cent interest in Westfield Whitford City that was sold to JY Group. In Queensland, the sale of Cairns Central to Fawkner last December was the biggest deal in the state in five years . “Retail values dropped during Covid but having already benefitted from significant structural changes, we’re going back to basics with property—it’s fundamentally about supply and demand,” Martin-Henry says. You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Shopping Centres Heat Up Across the Board

Get the full story.

Prefab, Modular, Ready-to-Go: Construction Innovation Evolves

High-Stakes Bid to Shape Adelaide’s Next Urban Precinct

Modular Hotel Rises on Queenstown’s Steepest Site

No Template, No Shortcuts: Divya Mehta on Leadership and Scale

Old Buildings, New Appeal: Heritage Office Interest is Surging in Brisbane

Melbourne Long Lunch | Panel discussion with Tim Price, Jeremy McLeod, Katya Crema & Anne Michaels

A fireside chat with Troy Daffy | Managing Director, Silverstone Developments

Brisbane Long Lunch | Panel discussion with Rob Comiskey, Frank Licastro, Steve Laffey & Alexandra Stuart-Robertson

Sydney Long Lunch | Panel discussion with Jamie Durie, Jennifer Macquarie & Michael Romano

The Developers Who Led the Way for BtR in 2025

Greenfield Developer ID_Corp Plots $1.4bn Land Lease Play

Prefab, Modular, Ready-to-Go: Construction Innovation Evolves

Property Predictions: Nine Trends That Will Shape 2026

2026 Developer Outlook Lunch | Melbourne

2026 Developer Outlook Lunch | Brisbane

2026 Developer Outlook Lunch | Sydney