CBRE’s 2026 Australian Shopping Centres Outlook forecasts just 700,000 sqm of new shopping centre space nationally between 2026 and 2028, as high construction costs and feasibility challenges constrain new developments.
Most of the supply that is coming online is concentrated in neighbourhood centres.
Floor space per person is also falling, reducing competition and lifting productivity.
Here’s a closer look at what’s driving the supply shortage, and what it means for investors.
Growth Meets Supply Gap
Australia’s population growth and consumer spending are rising, with CBRE forecasting national retail sales will reach $530 billion by the end of the decade.
That growth is expected to flow into key categories, including food, groceries, services and essentials.
Australia also has relatively limited shopping centre space compared with global markets.
Sameer Chopra, CBRE Pacific Head of Research, said the limited supply of shopping centre space was helping existing assets perform more strongly.
“The shopping centre GLA per capita is 0.69, low by global standards, and we see limited scope to build competing product,” Mr Chopra said.
“In turn this allows for more productive shopping centres, with the majority exhibiting sales performance of at least $9,000 per square metre.”
Tighter Market for Tenants
Retailers are also faring better, with occupancy cost ratios at regional and sub-regional centres easing to below pre-2020 levels.
Almost 60 per cent of centres are now recording vacancy rates below 5 per cent.
CBRE has recorded positive re-leasing spreads every year since 2023.
Mr Chopra said tight vacancy was giving landlords more opportunity to improve the quality of their tenant mix.
“Since 2023, we have seen a consistent pattern of positive re-leasing spreads,” Mr Chopra said.
“At sub-5 per cent vacancy, most landlords have also managed to re-lease under-performing tenancies with higher-performing retailers.”
Rental Growth Drives Returns
Improving fundamentals are changing how investors assess shopping centre returns.
CBRE says returns are increasingly driven by rental growth and income performance, rather than yield compression.
In a higher-interest-rate environment, assets with stable income streams and potential for income growth are becoming more attractive to investors.
Simon Rooney, CBRE Pacific Head of Retail Capital Markets, said shopping centres were benefiting from diverse income streams and opportunities to grow rents.
“Return profiles for shopping centres are considered more resilient relative to other commercial asset classes, due to the diversity of income streams, re-based income levels, shorter lease terms providing opportunity for positive leasing spreads together with fixed income growth mechanisms, offering a buffer against volatility and economic headwinds,” Mr Rooney said.
“Importantly, landlords can actively curate and remix tenancy profiles, driving income growth and create ancillary revenue stream, further strengthening the sector’s defensive characteristics and long-term investment appeal.”
Investors Target Quality
Institutional and offshore capital returned to the sector in 2025, as investment activity rebounded.
Retail cap rates have also held up better than other commercial asset classes despite elevated bond yields, reflecting confidence in the durability of income streams.
Demand remains focused on quality, with investors showing the greatest interest in centres with strong locations, tenant mixes and future growth potential.
Mr Rooney said both domestic and international investors were becoming more selective about the assets they pursued.
“Both domestic and global capital is actively reallocating back into the Australian retail sector, driven by renewed conviction, compelling risk-adjusted returns, and an increasingly competitive market, with offshore capital typically partnering with domestic managers,” Mr Rooney said.
“While investor sentiment remains positive, demand is becoming asset-specific, with income sustainability and future growth central to overall pricing.”
