The retail leasing market remains competitive as quality space attracts high demand

• According to the Australian Bureau of Statistics (ABS), household spending growth has remained elevated throughout the year and is 5.0% higher than the same time last year.
• As the summer and the Christmas period approaches, tenants are looking to secure spaces that are exposed to high levels of foot traffic but favour more flexible terms with preference for shorter-term leases.

A number of new-build projects complete in the quarter, showing a spike in supply despite cost escalation

• Two neighbourhood centres, The Gables Town Centre (9,400 sqm) and The Hills Showground (9,500 sqm), both reached completion in the quarter, providing a boost to quarterly supply in Sydney.
• Three sub-regional refurbishment projects in Lavington Square, Ashfield Mall and Jesmond Central reached completion during Q3 2025.

The yield compression cycle continues for some Sydney sub-sectors

• Both the Sub-Regional (median) and Neighbourhood (midpoint) yields compressed in the quarter by 25 basis points (bps) and 38 bps respectively.
• Investment volumes within Sydney this quarter totalled AUD 873.7 million, with Bankstown Central being the largest transaction. The asset was sold by Panthera Property Group to JY Group for AUD 637.2 million.

Outlook: The yield compression cycle is expected to continue gradually into early 2026

• Regional and neighbourhood yields are forecast to continue the trend of yield compression over the remainder of 2025 and early 2026, supported by strong investment interest for convenience-based retail centres.
• Following on from the relatively high level of supply in the quarter, a number of projects are forecast to reach completion by the end of 2025, bolstering the average annual supply story for Sydney.