The Australian retail investment market experienced a significant resurgence in 2024, with major retail transactions totalling approximately $7.7 billion. The latest data reveals compelling insights into market trends, investor behaviour, and future outlooks.

Retail Transaction Volumes Up 35% Year-on-Year
Retail investments rebounded strongly in 2024, with transaction volumes increasing by 35% compared to the previous year. This growth highlights renewed confidence in the sector, following a period of lower activity due to elevated finance costs.

Investor momentum is building for 2025, with many groups poised to re-enter the market. All four major banks are forecasting rate cuts in the first half of 2025, expected to improve borrowing conditions and further fuel demand.

Listed Funds and Institutions Dominate as Net Sellers
Listed funds and institutions accounted for 75% of all divestments but only 37% of acquisitions in 2024, as they focused on portfolio rebalancing and core asset retention. However, this trend may shift in 2025, with institutions expected to become net buyers once again, leveraging new domestic and offshore capital mandates and reducing debt costs. 

Western Australia Becomes Second Most Active State for Retail Transactions
For the first time, Western Australia ranked as the second most active state for retail investment transactions, driven by the sale of four regional shopping centres, the largest amount for this asset class nationwide. The state’s strong economic and population growth played a key role in this increased activity.

Second Half of 2024 Drove Transaction Activity

Continuing a multi-year trend, the latter half of 2024 accounted for the majority of transactions. Notably, Kallo Town Centre (VIC) was sold for $64.5 million to Region Group in December, contributing to:

• 72% of total transaction volume ($) occurring in H2
• 43% of total transaction volume ($) occurring in Q4

Non-Discretionary Retail Maintains Strong Performance
Yields for non-discretionary retail assets held firm, with neighbourhood centres averaging a 6% yield. Supermarkets continued to attract investor interest, averaging a 5% yield, with select assets such as Coles Essendon and Coles Bentleigh (VIC) trading at yields as sharp as 3% due to their high underlying land value and strategiclocations.

Retail Assets Trading Below Replacement Cost
A significant number of transactions in 2024 occurred below replacement cost, offering investors compelling value. Sub-regional centres, for example, traded at an average sale rate of $4,790 per square metre (excluding NSW transactions), approximately 30% below replacement value, presenting opportunities for long-term capital growth.

Surge in Sub-Regional Transactions

Sub-regional centres accounted for 30% of total retail transactions in 2024, with volumes rising 83% year-on-year and 47% above the five-year average. New “core-plus” capital mandates targeting scale, value-add opportunities, and superior liquidity drove this demand.

Large Format Retail (LFR) Centres Attract Renewed Interest
Large format retail centres continued to attract investors due to stable cash flows and annual rental uplifts. Strong net migration and constrained new supply have increased rental pressure while minimising incentives and capital outlays.

Outlook for 2025: A Strong Year Ahead

The retail property market is poised for continued growth in 2025, driven by a convergence of positive economic and market conditions:

• Strong national population growth, bolstering retail demand
• Limited new retail supply, increasing competition for existing assets
• Diminishing bid/ask leasing spreads, supporting rental growth
• Anticipated interest rate cuts, improving investor confidence and borrowing capacity

With REITs and institutional investors expected to re-enter the market, competition for high-quality retail assets will intensify, driving further capital inflows. The resilience of non-discretionary retail and continued positive leasing trends will further reinforce market strength.

Industry Experts Weigh In
Justin Dowers commented, "The strong rebound in retail transactions demonstrates renewed confidence in the sector, with investors increasingly looking to position themselves ahead of anticipated interest rate cuts. The depth of capital and diversity of buyers emerging in the market is particularly encouraging."

Philip Gartland added, "2024 provided a unique opportunity for astute investors to secure high-quality retail assets at compelling values. As market fundamentals strengthen, we anticipate heightened activity in 2025, particularly from institutional and offshore capital sources."