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Australia’s retail real estate sector is undergoing a quiet transformation. Once viewed as the most exposed to structural disruption, retail is now demonstrating resilience and adaptability. The Q3 2025 Australian Real Asset Review reveals a sector stabilising and evolving – driven by renewed consumer confidence, strategic repositioning, and a shift toward experience-led formats.
The rebound is supported by a sharp lift in sentiment. The Westpac-Melbourne Institute Consumer Sentiment Index rose 12.6% in July 2025, its highest level since early 2022. While caution persists, the outlook for spending is improving. Wages are rising faster than inflation, and mortgage interest rates are falling.
Retail sales grew 4.9% year-on-year in June 20251, with solid performance across discretionary categories – fashion, dining, entertainment – as well as department stores and household goods. Importantly, foot traffic has returned to near pre-pandemic levels in many centres, reflecting renewed appetite for in-person experiences.
As our latest report highlights, retail tenancy mixes are shifting. Traditional anchors like department stores are being replaced by entertainment, wellness, and food and beverage offerings. This experience-first strategy is helping landlords drive dwell time and differentiate assets.
Challenges remain for underperforming regional centres and legacy formats, but the broader trend is one of reinvention. Retail is repositioning itself as a destination for connection and community, not just transactions.
Leasing activity in Q3 was strongest in lifestyle and convenience centres, with national occupancy rates holding steady at 98.1%2. Retailers are increasingly favouring centres with integrated digital infrastructure and sustainability features – factors now influencing leasing decisions.
After two years of correction, retail asset values appear to be stabilising. Yields for prime assets held steady at 5.5%–6.0%, with some compression observed in neighbourhood and large-format centres. Among unlisted wholesale funds, retail was the top performer, returning 7.6% in the year to June 2025.
Transaction volumes rose 12% in the quarter, reaching $1.1 billion3. Notably, private capital and offshore investors are re-entering the market, drawn by the sector’s improved income visibility and relative value on offer compared to other asset classes.
Retail’s evolution extends beyond tenant mix. ESG is increasingly central to asset performance and we are seeing centres with strong sustainability credentials, community engagement, and adaptive reuse strategies outperforming their peers.
Green leases, solar installations, and waste reduction initiatives are becoming standard across high-performing centres, reducing operating costs while at the same time, enhancing tenant retention and customer loyalty.
The retail sector’s journey over the past five years has been one of disruption, adaptation, and now, renewed optimism. The Q3 2025 ARAR presents a sector that has found its footing and is repositioning for long-term relevance.
For institutional investors, retail real estate is back on the radar. Selectivity will be key – focusing on assets that are aligned with evolving consumer behaviours, ESG imperatives, and the shift toward mixed-use, experience-led environments.
In a market where resilience and adaptability are critical, retail is showing it has both.
Read the full Dexus Australian Real Asset Review Q3 2025.
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