ce available per person in Australia is steadily shrinking. At the same time, the cost to build or redevelop is climbing rapidly. On paper, it simply looks like a real estate issue. But if we dig a little deeper, it quickly becomes something else entirely: It’s an insight into the next chapter of retail evolution. This is no longer just about space. It’s about value — emotional as much as commercial — and the requirement for brands to show up differently if they’re serious about staying relevant. Just to be clear, space is getting scarcer. And more expensive. Which means the value of every single square metre, every shelf, every surface, every interaction has just gone up. The numbers behind the narrative MST’s report paints a very clear picture: The retail landscape is tightening further. In the past five years, floor space per capita in Australia has declined from 2.27sqm to 2.20sqm, and it’s projected to fall by a further 0.7 per cent each year. At the same time, consumer demand is expected to grow by 0.5 per cent per capita. That 1.2 per cent difference may seem small and to many, they’ll see it as insignificant, but in the world of retail, it’s a pretty big squeeze. And it will be felt on both sides of the counter. Economically, the pressure is just as real and sharp. Landlords now need rents to increase by 37 per cent on 2019 levels to justify redeveloping an A-grade shopping centre, mostly due to rising construction and borrowing costs. As a result, rents are forecast to grow by 2.8 per cent to 3.2 per cent annually, slightly outpacing like-for-like retail sales growth, which currently sits between 2.7 per cent and 3.1 per cent. This marks a massive reversal. For the past decade, falling rent-to-sales ratios provided retailers with a margin tailwind, a quiet little boost that helped shore up profitability. Now that tailwind is turning into a headwind. And it’s already starting to impact brands with heavy exposure to premium centres, names like Accent Group, Premier Retail, City Chic and JB Hi-Fi come to mind. But the real implications of rising rents extend far beyond lease renewals or balance sheet margins. They touch something way deeper: the psychology of the customer. Experience has to work harder for the customer As physical space becomes more expensive and harder to justify, the role of the store is changing and evolving fast. I’ve been saying this for a while now, but every square metre must now deliver more. Not just in terms of products sold, but in terms of how it feels. How it connects. How it earns attention, emotion and, ultimately, loyalty. Smart retailers have already pivoted, moving away from functionality and leaning into feeling — from footprint to memory. 1. Stores must perform like stages or studios With less space and higher stakes, the traditional model of retail — aisles, stock, repetition — is now under pressure. In its place, a new model is emerging: One where the store becomes a stage or studio. A place to curate, to perform, to tell stories and assist discovery. This doesn’t mean retailers should start throwing out product. It means reframing how that product is presented. Curated ranges, sensory environments, integrated fulfilment services and most importantly, emotional cues are fast becoming the new standard and should be the norm. When customers walk through the door, they’re not just looking to buy. They’re looking to feel, to belong, to discover that thing they didn’t know they needed. In this environment, space can’t just be about function. It has to perform. 2. The middle is getting squeezed MST’s data also shows a clear divide emerging between high-performing retail centres and everyone else. Premium malls are seeing stronger rental growth, and for a very good reason. They naturally drive higher productivity, attract more affluent foot traffic, and encourage longer dwell times. Value-focused centres are also sharpening their proposition, doubling down on efficiency, accessibility, and essential retail. But it’s those retailers in the middle, the ones without a clear emotional hook or sharp value edge, who are fast being left behind. For the customer, this shows up as a widening gap between, “Is it worth the trip?” and “Why did I even bother?” The retail grey zone is disappearing. You’re either memorable, or you’re invisible. It’s that simple and it’s showing up in the retail casualties we see in the news. 3. Price sensitivity is driving the shift towards experience With margin pressure rising and discounts thinning out, customers are beginning to rethink what ‘value’ actually means to them. It’s no longer just about price tags, in my opinion, it hasn’t been about this for some time now. It’s about payoff. Emotional ROI. Shoppers are weighing up the full picture, the energy of the space, the warmth and connection of the staff, the ease of navigation and the story they get to tell themselves by being there. It’s a simple equation: When everything costs more, people become more selective. Not just with their wallets, although that’s where we tally the votes, but with their attention. The brands that win will be the ones that make every interaction feel like it was worth it. 4. Clarity, conviction and connection win Customers today aren’t just asking, “What do you sell?” They’re asking: “Do I feel like I belong here? Is this a store I’d shop in?” “Do I trust what you stand for and believe it?” “Is this worth my time, not just my money?” In a compressed retail environment, there’s no longer room for vagueness. Clarity of purpose is no longer just a brand value, it’s a survival strategy. And emotional resonance? That’s a growth lever. And just to be clear, purpose is not, “Why do we exist outside of making money?” It’s knowing the question your customer is asking if your brand is the answer. So what should retailers do now? This is not a story about property. This is a moment of retail reinvention. We know that rising rents are just one expression of a much bigger shift, towards more emotional, intentional and human retail. So here’s where to focus next: 1. Build memory, not just footprint: Smaller space? Make it count. Design stores as emotional anchors, not transactional zones. Think: atmosphere, energy, intention. Less stock. More soul. Your emotional camp will be everything. 2. Know your emotional default: Every brand sparks a feeling, whether they realise it or not. Is it safety? Belonging? Reward? Freedom? Know your core emotional posture, then double down on it so it’s clear, build experiences that deliver on it, every time and time and time again. 3. Treat your store like media: Every metre of space tells a story. Every shelf, every scent, every lighting choice is a line in your brand’s script. If you can’t elevate the emotional energy of your space, you’re just paying for expensive silence. 4. Replace ‘location, location, location’ with ‘feeling, feeling, feeling‘: Especially when you are in top-tier malls where rent is highest. Emotional impact now trumps footfall. If your space doesn’t move people, it certainly won’t move product. The wrap-up Rising rents aren’t just an economic trend. They’re a clear cultural indicator. They’re telling us the old rules of more space, more stock, more sales, no longer apply. Brands that want to lead the way in the next era of retail need to understand what this moment is calling for: Connection, not just conversion; spaces and experiences that stir something. They need to understand that every square metre is a chance to create and measure meaning, loyalty and memory. Because when the rent goes up, the bar goes up, too. And in this new landscape, only the brands that rise with it will earn the right to stay.