Solid household spending growth supported retail conditions, while vacancy rates contracted across most categories

• Household spending in New South Wales (NSW) increased by 1.6% over the year to October 2025, this was the strongest out of all states and territories, according to the Australian Bureau of Statistics, supporting retail market conditions.
• The vacancy rate in Q4 2025 contracted across most retail subcategories, with the exception of sub-regional and large format retail, which marginally increased over the second half of 2025.

Four retail completions delivered 23,700 sqm of new supply through a mix of new market additions, expansions and refurbishments

• Four retail completions totalled 23,700 sqm over the quarter, including two new assets: Sydney Fish Market (12,000 sqm of retail space) and Calderwood Village (7,500 sqm).
• We are currently tracking 164,400 sqm of retail stock that is under construction across Sydney. The majority of this development pipeline is concentrated in LFR retail totalling 59,800 sqm. This is followed by Neighborhood centres totalling 53,700 sqm.

Retail rents recorded modest rent growth, while AUD 1.7 billion in investment volumes were recorded in Q4 2025

• Gross rents showed modest growth across all retail categories in Q4 2025, while market yields remained stable quarter-on-quarter across most categories, with the exception of large format retail, which compressed by 25 basis points (bps).
• Investment volumes within Sydney this quarter totalled AUD 1.7 billion, with the 19.9% interest in Westfield Sydney for AUD 864.0 million being the largest transaction, sold by Scentre Group to Australian Retirement Trust.

Outlook: Steady supply levels in 2026, while regional and sub-regional yields forecast to compress

• With high occupancy rates, healthy levels of demand and income growth improving, this is likely to support continued investment activity into the retail sector and result in further yield compression over 2026.
• Inflation surprised on the upside towards the end of 2025. If inflation remains sticky this could potentially impact consumer demand and dampen retail turnover growth over the near-term. At this point in time it does not seem to be impacting investor sentiment.