Empty shopfronts, full aisles: why everyday retail is holding up

Walking down the main street of almost any Australian city, it’s hard to miss the empty shopfronts, with vacant tenancies, dark windows and ‘for lease’ signs becoming a familiar part of the streetscape.

With so many empty stores in prominent places, it would be easy to assume that a retail property investment is a risky addition to a commercial property portfolio.

But while some elements of retail appear to be struggling, other sub-sectors are holding up well.

According to Knight Frank’s Australian Retail Review, household spending rose 6.8 per cent in the year to August 2026, while JLL reported $16.3 billion of retail property transactions in the 12 months to the third quarter of 2026, the highest rolling annual total in its tracking history. Household spending rose another 0.6 per cent in September, according to seasonally adjusted figures released Wednesday (4 November) by the Australian Bureau of Statistics (ABS).

Step into a neighbourhood shopping centre on a weekend morning and the contrast with the main street becomes hard to miss.

The car park is filling up, the supermarket has a steady stream of shoppers, and the café and pharmacy are busy.

Knight Frank recently reported retail vacancy of 3.0 per cent across the sector, its lowest level in over a decade, while CBRE says new leases for convenience and neighbourhood centres are being signed at higher rents than the expiring ones they replace.

What separates the busy centre from the struggling main street largely comes down to what people buy and where they buy it.

Discretionary purchases on clothing, homewares and furniture are more exposed to interest rates and the housing market than groceries, pharmacy items, and other essentials, which households keep making no matter the economic conditions.

Who is doing the spending is notable too. Knight Frank, drawing on Commonwealth Bank data, reported that recent growth has been led by households aged 65 and over, whose spending rose 10 per cent over the past year, compared with 4 to 5 per cent for those aged 25 to 54.

Overall, Australians are still spending, but the mix is shifting, and that shift shapes which centres hold up best.

Managing commercial pressure points

Neighbourhood centres have plenty going for them, but like any property, they need to keep pace with their surroundings.

A large share of the new shopping centre pipeline over the next few years is neighbourhood development, and new space can put pressure on rents and occupancy where it's built, particularly if local demand doesn't keep pace. The mix of each centre and the catchment it serves are therefore worth watching closely.

The centres best placed to manage that pressure are often the ones offering more than one reason to visit. Urbis reports that experience-based uses and in-centre consumption are growing, with neighbourhood centres playing an increasingly social role.

Medical practices, childcare, gyms and other everyday services can turn a single errand into a multi-purpose trip, encouraging repeat visits and making the centre a regular part of the local routine.

Location plays its part as well. Urbis’s 2026 benchmarks show inner and middle-metropolitan centres outperforming those in outer-metropolitan growth areas, which it links to cost-of-living pressures.

According to JLL, much of the recent neighbourhood development has been in fringe growth corridors, where the match between local services and population growth will matter most.

What to look for in retail

Most individual investors access centres like these through a fund, which pools capital from many investors and spreads it across a portfolio.

Not every neighbourhood centre, however, faces market pressures in the same way.

For individual investors using a fund, the more useful questions are less about which single centre to pick and more about how the fund is positioned.

How much of its portfolio sits in neighbourhood centres, how exposed those centres are to new supply nearby, and how closely each asset tracks local population growth are all worth understanding before drawing conclusions.

The main street and the neighbourhood centre are both part of Australia’s retail landscape, but they are facing different conditions.

But while the empty shopfronts are real, they only describe part of the market.

Performance varies widely across retail, and the detail of each centre, including its location, tenant mix and the supply arriving nearby, matters as much as the headline trend.