Retail shifts are changing the way we shop, play and invest
The retail sector is having to adapt to changing consumer preferences, but continues to present investor appeal as real wages and household spending grow.
Australia’s retail sector is undergoing a transformation, influenced by shifting consumer behaviours, technological advancements and evolving economic conditions.
To remain competitive, landlords and retailers must adapt to these changes. The JLL Retail Centre Managers' Survey Findings - 2025 offer insight into the current state of the retail market, including identifying potential future trends.
Retail resilience amidst uncertainty
Despite global economic uncertainty, the Australian retail market has demonstrated resilience.
This is supported by stronger disposable household income relative to other advanced economies, robust labour market fundamentals, real Australian wage growth, and the potential for a further lowering of interest rates over the second half of 2025.
These factors are expected to support retail turnover growth over the next 12 months.
However, competition for tenants remains fierce, requiring landlords to continually adapt and innovate their strategies. Encouragingly, household spending grew 3.5 per cent year-on-year as of March 2025, with discretionary spending also up 3.0 per cent year-on-year.
Figure 1 below highlights ‘retail turnover expectations over the next 12 months’. A large proportion of centre managers anticipate positive turnover growth, with 42 per cent expecting an increase of 3 to 6 per cent.
This reflects a cautiously optimistic outlook for the near-term retail landscape, despite cost-of-living pressures and global economic uncertainty.
Furthermore, Australia’s stable economic environment, with GDP growth expected to accelerate to 1.6 per cent in 2025 and 2.3 per cent in 2026, provides a robust foundation for retail demand growth. This compares favourably to advanced economies, where GDP growth is forecast to average 1.4 per cent in 2025 and 1.5 per cent in 2026.
Shifting consumer spend
Consumer spending patterns are continuing to shift, with services such as recreation, health and wellness, and restaurants and food categories consistently reported as showing increased spend.
Conversely, categories like clothing, footwear, accessories, and household goods show decreased spend.
A broader global shift towards experiential spending has been observed, where consumers prioritise dining and leisure activities. To attract and retain customers, retail shopping centres must focus on creating value and unique experiences.
Landlords are recognising this shift, with many centre managers indicating that average spend is up, largely due to price increases rather than increased visitation.
This highlights the need for centres to offer compelling experiences that justify higher prices and drive customer loyalty.
Sub-regional shopping centres are also reporting an uptick in sales, in line with increased foot traffic, with food and dining categories continuing to be growth drivers.
Adapt or fall behind: innovation in retail
To remain competitive, retail centres are increasingly integrating digital technologies and focusing on community engagement.
A significant portion of respondents (42 per cent) reported stronger use of online/click and collect services over the past 12 months, indicating the need for shopping centres to continue evolving into multi-purpose hubs that cater to consumer needs.
Landlords are also employing strategies such as improving centre ambience, place-making, and marketing to attract customers.
This community-centric approach aligns with a global trend of shopping centres transforming into social hubs, offering community spaces, events, and services beyond traditional retail.
The prevalence of incentives and rent-free periods as attractive deal terms also underscores the need for adaptation to attract and retain tenants in the current market.
As consumers increasingly access information online through smartphones, digital consumption is set to continue expanding, further elevating the competitive landscape among retailers.
Strategic redevelopments, optimised tenant mixes and enhanced customer experiences will be essential as shopping centres adapt to evolving market conditions and consumer preferences.
Innovation and adaptation are critical for sustaining growth in Australia's evolving retail sector.
