According to Colliers’ latest Large Format Retail Insights Q1 2026 report, Australia’s Large Format Retail (LFR) sector is facing some of the tightest leasing conditions on record, as strong population growth and expanding suburban catchments collide with a prolonged shortage of new development.
While the development pipeline is beginning to improve, it remains well below historical levels, ensuring competitive tension stays elevated even as new opportunities gradually return to the market.
Vacancy falls to record lows
According to the Large Format Retail Association, national vacancy has fallen to 2.8%, one of the lowest levels recorded across the LFR market. With limited new centres being delivered, tenants are increasingly competing for established assets across key growth markets.
“Retail follows rooftops but development hasn’t kept up with the growth in new households. Planning bottlenecks, rezoning complexity and land constraints particularly in metropolitan growth corridors are keeping vacancy compressed and reinforcing upward pressure on rents,” said Sam Ryan, Senior Research Analyst | Research.
Future supply is healthy to meet demand
Over the next five years, just under 600,000 square metres of new floorspace is forecast nationally, representing a solid development pipeline across Australia’s key growth markets.
New South Wales, Queensland and Western Australia, the three states experiencing the strongest population growth and expansion of new housing corridors are set to receive a significant share of this future supply. Victoria is similarly positioned with supply forecast to account for approximately 20 per cent of national delivery, reinforcing a strong pipeline across the eastern seaboard.
While enquiry levels remain elevated, this upcoming delivery will provide additional opportunities for tenants seeking scale in high-performing growth corridors.
Rental growth remains strong
Western Australia has recorded the strongest three-year average gross face rental growth nationally at 7.7%, followed by Queensland at 6.0% and New South Wales at 5.0%. These markets are also forecast to account for most of the new supply over the next five years, though delivery remains insufficient relative to demand.
“When vacancy sits below three per cent, it becomes a highly competitive environment. We’re seeing strong enquiry depth and multiple tenants vying for the same opportunities, particularly in high-growth corridors. High-quality retail space is scarce and retailers understand the importance of holding onto well-located space,” added Will Goldsworthy, Director, Australia | Large Format Retail Leasing.
This sustained performance continues to reinforce LFR’s position as a proven and resilient retail investment asset class. Strong national tenant covenants, essential retail categories and consistent rental growth have underpinned investor confidence with the sector delivering the strongest average face rental growth of any retail sub-sector over the past decade.
Retailers optimise footprints
Rather than exiting centres during periods of economic adjustment, many retailers are choosing to optimise their store footprint to remain embedded in high-performing trade areas. This behaviour is further reducing tenant turnover and keeping vacancy at record lows.
“Retailers are prioritising scale in growth corridors and that competition is translating directly into rental growth,” added Will Goldsworthy.
Over the past decade, LFR has recorded the strongest average face rental growth of any retail sub-sector with gross average face rents rising 12.3%. The past three years alone delivered 5.6% growth, underscoring the format’s resilience even through broader economic volatility.
From a global perspective, direct-to-customer retail strategies are a key driver of demand with retailers continuing to prioritise control over their physical networks. Store presence plays a critical role in brand visibility, customer engagement and integrated fulfilment strategies, further reinforcing demand for well-located LFR space across growth corridors.
Looking ahead
Australia’s population is projected to expand by approximately 15 per cent by 2035. However, without a meaningful acceleration in development delivery, supply conditions are expected to remain tight continuing to drive competition and rental growth.
Related Articles
