Retail Property in 2025: Where Are the Smart Investments?

As we navigate through 2025, Australia’s retail property market is evolving rapidly. Shifting consumer behaviours, tightening household budgets, and changes in how we shop are all reshaping the retail landscape. Amidst the noise, strategic investors are identifying where the real opportunities lie.

While not all retail assets are created equal, smart investment plays are emerging for those who understand the nuance. The key to success lies in recognising these nuances and adapting investment strategies accordingly.

Not All Retail is Created Equal

Traditional brick-and-mortar retail has been under pressure for some time, and 2025 is no exception. The cost-of-living squeeze is making consumers more selective with their spending, and weaker discretionary outlay is being felt across strip retail and underperforming centres in secondary locations. However, this shift presents a unique opportunity for investors to recalibrate their focus towards sectors that promise resilience and growth.

Investors must now be astute in evaluating each asset's potential by considering factors such as location dynamics, tenant diversity, and adaptability to changing consumer preferences. For instance, properties that can seamlessly integrate online and offline shopping experiences may offer a competitive edge in attracting tech-savvy consumers who demand convenience without compromising quality.

The Rise of Large-Format Retail

Large-format retail (LFR) continues to defy the broader trend. These assets, typically home to national brands like Bunnings Warehouse, JB Hi-Fi, Harvey Norman, and Anaconda, are still seeing strong tenant demand, particularly from retailers offering essential household goods, electronics, and lifestyle products. The robustness of LFR lies in its adaptability to market demands while remaining focused on core consumer needs, such as home improvement, technology, fitness, and everyday living.

LFR benefits from two major tailwinds:

• Resilience of Essential Spending: Furniture, whitegoods, electronics, and discount department stores are holding up well even as consumers trim discretionary budgets. This resilience underscores the importance of focusing on sectors that cater to essential needs rather than luxury or non-essential items.
  

• Strategic Location Advantage: LFR assets are typically located on major arterial roads with strong visibility and access, helping drive consistent foot traffic. This strategic placement not only ensures high accessibility but also enhances brand visibility for tenants—an attractive proposition for retailers looking to capture a larger market share.
  

For investors, LFR offers scale, long lease terms, and stable cash flows. Traits that are increasingly attractive in an uncertain market. Moreover, as sustainability becomes a growing concern among consumers and businesses alike, there is potential for LFR properties to incorporate eco-friendly practices such as energy-efficient designs or green spaces that further enhance their appeal.

Neighbourhood & Convenience Retail: Stable and Sticky

Neighbourhood shopping centres anchored by supermarkets and everyday services (think medical, pharmacy, and allied health) are also performing well. These assets are tightly held and often see strong competition when they hit the market due to their inherent stability.

In 2025, we’re seeing increased investor appetite for these centres due to:

• Inflation-resilient tenant mixes: Tenants offering essential goods or services provide a buffer against inflationary pressures by ensuring steady demand regardless of economic fluctuations.
  

• Consistent traffic from local catchments: Proximity to residential areas guarantees regular patronage from nearby residents who rely on these centres for daily necessities, enhancing long-term viability even during economic downturns.
  

• Embedded community reliance: As Australia's population continues to grow and decentralise into outer-metro growth corridors where new communities form rapidly around infrastructure developments like schools or transport hubs, local centres will only become more integral to daily life within these burgeoning neighbourhoods.
  

The Mixed-Use Movement

Developers and investors alike are increasingly favouring mixed-use projects that incorporate retail alongside residential or office components. A trend driven by evolving urban planning policies aimed at creating vibrant, multi-functional spaces that support both commerce and community building.

These developments:

1. Support 7-day activation and diversified income streams: By offering multiple uses within one site, mixed-use developments ensure continuous activity throughout the week, reducing risk associated with single-purpose properties reliant on specific trading days.
   

2. Attract higher-quality tenants due to built-in foot traffic: Integrated environments naturally draw diverse clientele, benefiting both retailers and residents who enjoy the convenience of having everything they need in close proximity to home or work.
   

3. Are often positioned in strategic infill locations where land is scarce: As cities continue to expand outward, developers are increasingly looking to maximise existing urban fabric through densification strategies that favour compact, walkable communities over sprawling suburbs disconnected from essential amenities and infrastructure. These approaches support sustainable growth patterns for future generations.
   

As planning frameworks continue to evolve in support of higher-density, walkable communities, mixed-use assets are becoming central to urban transformation strategies, promising exciting opportunities for savvy investors ready to embrace change.

The Bottom Line

Retail property investment in 2025 is about quality, not quantity. Investors need a laser-focused approach when assessing potential acquisitions, ensuring each asset aligns with their specific goals for portfolio diversification, risk management, and return maximisation. While weaker assets may continue to face challenges, prime retail, with the right fundamentals, is offering compelling returns, particularly when integrated into broader mixed-use precincts centred around essential services.

At MCommercial, we help clients cut through the noise to identify retail opportunities that deliver performance, resilience, and long-term value. Whether you’re looking to diversify your portfolio or reassess underperforming assets, our expertise across sub-sectors can help you make smarter decisions.

Looking for high-performing opportunities? Get in touch with us today and let us guide your journey to success with tailored insights and expert advice every step of the way.