Australia’s retail sector is poised for a positive year, with the latest Australian Retail Review – April 2025 forecasting a 3.5 percent rise in retail sales and a welcomed return to asset value growth.
Knight Frank senior economist for research and consulting Alistair Read, who authored Australian Retail Review – April 2025, attributes alleviated pressure on households budgets as responsible for the projected retail sales growth.
“The outlook for retail sales is positive – with 3.5 percent forecast growth over 2025 – as some of the pressures on household budgets start to ease and spending starts to improve,” he says.
Read says high inflation, declining wages and surging interest rates posed major difficulties for households over the past two years, yet a resilient labour market and wage growth will help mitigate the ongoing impact of these challenges.
“Falling inflation, a cut in interest rates, a tight labour market and real wage growth are forecast to drive a 2.2 percent annual increase in real personal disposable income in 2025, which would be the strongest growth since 2021,” he says.
The report identified the three major themes for the retail property market in 2025, including an increasing presence of market retailers, continued dominance of retail specialists as the primary asset buyers and a rising trend toward mixed-use facilities aimed at bolstering the appeal and marketability of retail properties.
Growing investment volumes in retail sector
Knight Frank’s report found improved retail investor morale emerged from evidence of a resilient trading performance from the major centres.
A boost in morale subsequently led to increased investment volume – $9.9 billion was traded, a figure up 39 percent from 2023. This momentum has been sustained over Q1 2025, as $2.9 billion worth of assets have been traded, with New South Wales leading the charge. Knight Frank hypothesises New South Wales’ commendable investment volume as due to the sale of the Westpoint Shopping Centre in January.
Investigations from the report also learned private investors are the most active and alert in the retail property market, representing 35 percent of total acquisitions made in 2024.
Knight Frank head of retail investments Campbell Aitken says “positive leasing trends, resilience in non-discretionary retail and increased liquidity” will diversify the playing field for the retail property market.
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