Retail property will continue to be in demand in 2026, especially neighbourhood centres with strong performance metrics, remixing opportunities, or the prospect of mixed use development, however commercial fundamentals will still need to stack up. 

Daniel Sutton, Director and Head of Asset Management at Raine & Horne Commercial Retail Services, said, “Demand will continue to be fuelled with the availability of capital locally and from Asia, seeking well-located, quality retail assets underpinned with secure income streams from our major supermarkets.

“That said, construction costs, inflationary pressures and the direction of interest rates in 2026 will be sure to play a big part in demand for retail property in 2026.”

Retail property fundamentals improve

According to Daniel, retail property fundamentals generally continued to improve in 2025, despite broader macroeconomic uncertainty around US tariffs, inflation and interest rate pressures, and that momentum is expected to extend into 2026.

“Well-positioned non-discretionary neighbourhood centres continued to be favoured, particularly in areas of strong population growth, and this trend will continue in 2026,” he said.

Retail sales, a key indicator of a retail asset's performance, is underpinning this confidence. Sales rose 6.2% in October[i] following gains of 4.7% in September and 3.1% in August, with cafes and takeaway food outlets continuing to perform strongly. These categories, together with supermarket sales, underpin many community-based neighbourhood shopping centres and are helping support stable income and tenant demand.

Looking ahead to 2026, Daniel believes low vacancy rates and rental growth in well-mixed retail assets are expected to drive continued strong demand for quality assets. However, inflationary pressures and the impact of interest rates on retail spending will be closely monitored.

“Value will continue to be derived from assets through remixing and small project opportunities, driving increased rental growth, increased patronage, and retail sales,” Daniel said.

“Shopping centres with mixed-use development opportunities and high-street retail with residential or offices above will also be strongly sought after.”

The retail leasing outlook for 2026

Retail leasing activity was solid in 2025, and that momentum is expected to continue in 2026. However, retailers are remaining prudent in their location choices, with strong supermarket-anchored assets and Large Format Retail (LFR), such as those popular with the likes of Harvey Norman, Supa Cheap Auto and Bunnings, continuing to be favoured.

High development costs and ongoing planning constraints are limiting new retail supply, Daniel noted, which is helping underpin rental price growth across established retail assets. “Population growth, particularly in areas with strong demand from younger consumers, is expected to see retail sales growth in 2026 for well-positioned, quality retailers, contributing to rental growth and lower vacancy rates.”

Demand for leased retail space in 2026 is forecast to remain strongest in well-established, high-performing supermarket-anchored centres, especially those with good accessibility, and that are clean and well-maintained. Daniel added, “Much of the retail leasing opportunities will come from remixing current tenants, exiting retailers that have not evolved, and replacing them with tenants that create more engaging customer experiences.”

By contrast, there will be pressure on strip retail leasing with strip shops, particularly those with tobacconists, facing increasing insurance costs. This is likely to lead to an increasing trend of tobacconist leases not being renewed in 2026, creating new retail opportunities. Daniel explained, “The continual evolution of strip retail with the exciting emergence of new retail offers will see demand for strip retail continue, albeit not as strong as quality neighbourhood centres.”  

For all your retail property sales and leasing needs, contact your local Raine & Horne Commercial office.

[i] https://retailmosaic.com.au/latest-insights/