The retail landscape is continuing to transform as shopping centres pivot from transaction-focused environments to experience-driven destinations. This shift isn't just a response to online competition, it's becoming a key driver of retail real estate's resurgence as a premier asset class in 2025.

Five years on from the pandemic, consumers have returned to physical retail spaces with new expectations. They are seeking not just products, but meaningful experiences that can't be replicated through a screen. Forward-thinking shopping centre owners have recognised this opportunity, investing strategically in experiential elements that engage all senses and create emotional connections with visitors.

The financial results of this approach are expected to build on the improvements already recorded in retail property returns. The latest MSCI data (December 2024) is compelling as retail assets delivered an average return of 6.3 per cent across all centre types, dramatically outperforming both office (-7.1 per cent) and even industrial assets (3.4 per cent). This represents a stunning reversal from early 2024, when much of the retail sector was still posting minimal or negative returns.

The consistent quarterly improvement throughout 2024, with retail returns accelerating most dramatically in Q4 when they jumped by 2.3 percentage points, the strongest quarterly growth of the year. Sub-regional centres led the charge with an impressive 8.3 per cent total return, followed by regional centres at 7.1 per cent, demonstrating centres with the right retail mix and experiential strategy are performing exceptionally well.

When shoppers visit for in-store experiences, they spend more time exploring entire centres, driving foot traffic and dwell times that benefit all tenants. More importantly, these physical interactions boost omnichannel performance, with catchment area online sales increasing significantly following experiential store openings. There is a growing wave of innovative store designs focused less on maximising product density and more on creating environments that facilitate genuine brand connections. From interactive displays to community gathering spaces, these stores are becoming destinations.

Savvy shopping centre operators are maximising this opportunity by treating every space as potential for experience creation. Be it a pop-up location in a vacancy or for the more bold centre owner, completely reimagining large sections to accommodate entirely new concepts. Traditional entertainment anchors like cinemas are no longer sufficient on their own; today's consumers seek diverse, interactive experiences ranging from immersive entertainment venues to affordable, luxurious dining destinations.

A prime example is the emergence of next-generation gaming venues that combine competitive e-sports, social gaming, and hospitality. These destinations create environments where visitors can compete, socialise, and share experiences across their social media networks, generating valuable organic marketing for the centre. These evolved concepts generate consistent foot traffic and create compelling reasons for extended visits regardless of traditional retail cycles.

This trend toward experience-anchored retail spaces is particularly significant as consumers increasingly value unique, shareable moments over transactions. The social media amplification of these experiences extends the centre's reach well beyond physical visitors, creating digital engagement that drives future visits. Entertainment-focused tenants often commit to longer lease terms, providing centre owners with stable income streams while activating both daytime and nighttime economies within their precincts. Centres embracing these strategies are seeing rental premiums and waitlists forming for prime locations.

Particularly notable is how this trend is revitalising retail assets across the centre types, from super regional to neighborhood centres. By focusing on creating experiences that reflect the specific needs and interests of their local community, even smaller centres are finding ways to compete effectively against both online channels and larger competitors.

As investors reassess retail real estate in 2025, those centres embracing entertainment and experiential strategies are demonstrating stronger results across the board. The retail centres that transform from places consumers need to visit into places they want to visit are emerging as the standout performers in commercial real estate portfolios. The unique value of physical experience is becoming retail real estate's most powerful competitive driving returns