ding to the Australian Bureau of Statistics (ABS). Add to that a natural increase (births minus deaths) of just over 200,000 over the same period and you have a material population gain to support retail sales growth. Even as immigration slows under political pressure to reduce numbers, retail industry professionals have reason to remain optimistic. Over the past two years, the most important source regions for overseas migration have been the Indian subcontinent, contributing more than 290,000 migrants; China, with nearly 110,000; the Philippines, with 76,000; the UK, with 40,500; and Vietnam, with 39,000. It’s not just about numbers; the diversity of migrants also creates opportunities to reshape tenant mixes in Australia’s shopping centres and retail strips. Traditionally, this strong population growth would have transformed Australia’s retail landscape, with new and large shopping centres built to meet increased demand. However, demand now outpaces the retail development pipeline, reducing retail space per capita and increasing the value of existing retail property. So, where are the pressure points, the hotspots that are being created by this population growth? CBDs of the biggest cities are reaping a windfall According to Sheree Griff, CBRE’s head of retail property management and leasing for the Pacific region, international migration to Australia’s capital cities is fuelling retail growth in CBDs, and international brands are among the chief beneficiaries. “We are observing growing demand for CBD retail, particularly in major cities like Sydney, Brisbane and Perth. It’s clear that population growth is a significant driver, particularly international migration, from countries such as Japan, Korea and China,” Griff told Inside Retail. The densification and diversification of major city populations, and the resulting retail demand, attracts global brands, including luxury retailers. “As these international brands seek to establish themselves, we are witnessing an increased demand for retail space to accommodate their expanded product ranges to meet the needs of consumers,” she said. The potential for retail growth in Australia’s biggest city CBDs is not only being driven by international migrants. Housing unaffordability in the suburbs is herding people into apartments in and around the CBDs. This densification trend – caused by the twin drivers of international migration and lack of affordable housing – is, according to Griff, presenting “a unique opportunity for us to leverage this CBD growth and cater to a more diverse retail customer base”. Sydney or the bush The lack of affordable housing in traditional areas favoured by home-buyers and renters is not just driving people to the CBDs, but to regional areas as well. This is naturally boosting demand for retail space. Western Sydney exemplifies the rapid growth of fringe areas around major cities. Parramatta has always been an exurb waiting to flex its muscles and become a major urban centre in its own right, and it seems that it is now coming to fruition. Just southwest of Parramatta, Edmondson Park, Oran Park and Leppington are also becoming areas of significant retail opportunity. This is a double-edged sword for retailers, of course, as increased pressure on retail real estate means rising rents and greater competition for space. Gary Mason, state director for retail leasing at Savills Australia and New Zealand, has seen firsthand the significant increase in demand for space in Western Sydney. “Our vacancies in Oran Park, for example, generate more enquiries than any other site we manage, and the outreach has not just been from local businesses,” he told Inside Retail. “What’s fascinating is the number of CBD-based operators looking to move west to capitalise on the growth and activity happening in the region.” To top it off, the new international airport in Badgerys Creek, 30 kilometres west of Parramatta and about 20 kilometres north of Oran Park, will make the area a focus of attention for commercial and residential development. Top regional growth corridors Vanessa Rader, head of research at Ray White, identified the following regional locations as offering strong growth potential for retailers: New South Wales Southwest Sydney, including Oran Park, Edmondson Park and Leppington Northwest Sydney, including Box Hill, Marsden Park and Schofields Western Sydney, including Badgerys Creek/the Aerotropolis precinct As Savills’ Mason noted, some of these exurban areas between Sydney and the Blue Mountains are developing into commercial hubs in their own right. These areas, originally offering lower rents, are now seeing prices for living and trading converge with those of established suburbs closer to the CBD. Victoria The area within half an hour southeast of Dandenong, including Officer, Clyde and Pakenham The western growth corridor, including Tarneit, Truganina, Point Cook and Melton The northern growth corridor off the M31, including Mickleham, Kalkallo and Donnybrook Queensland The growth corridor south of the Brisbane metropolitan area, arcing through Yarrabilba, Ripley Valley and Springfield Lakes The northern Gold Coast, including Pimpama, Coomera and Upper Coomera The Sunshine Coast, including Maroochydore and, to the south, Caloundra South and Aura Western Australia The northern corridor, including Alkimos, Yanchep and Eglinton The southeastern corridor west of Armadale, including Byford, Harrisdale and Piara Waters Further south, the southern corridor between Rockingham and Mandurah, taking in Baldivis and Secret Harbour South Australia The area north of Elizabeth, including Munno Para, Angle Vale and Virginia The Mount Barker region southeast of Adelaide The Seaford/Aldinga area on the southern coastal fringe of the Adelaide metro Regional shopping malls are in demand Increasing retail space to meet demand is challenging. CBRE’s Griff explained that while regional population growth is rising as people seek affordable housing, “increased construction costs are making building more regional shopping centres cost-prohibitive”. The reference to regional shopping centres here is to the largest enclosed malls, those that typically have 40,000sqm of leasable area and hundreds of tenants across all retail categories, plus entertainment and services. Few of these are now being built anywhere in the developed world, and their increasing scarcity is pushing up their value. These regional shopping centres are attractive to both investors and tenants because they are typically well-located, well-managed, and have a critical mass of tenants, which creates a large trade area. “Investors are drawn to the stable cash flow and potential for value appreciation in these properties, particularly as they adapt to incorporate mixed-use elements and modern amenities that respond to changing consumer preferences,” Griff said. “This synergy between tenants and investors creates a robust investment that positions regional shopping centres as key players in the retail landscape.” Moreover, the ability to house such a diverse menu of tenants under one roof has enabled them to emerge as suburban community hubs, supplanting the suburban strips and town centres of yore. Fears just a decade ago that these large regional shopping centres would become obsolete at the hands of e-commerce have proven wildly inaccurate, much like Mark Twain’s famous quote after reports of his demise were wrongly announced in the American press: “Reports of my death are greatly exaggerated”. Construction costs are soaring The scarcity of new retail property space is partly due to high construction costs in Australia. According to CBRE’s 2025 Pacific Market Outlook, these costs are significantly higher than pre-Covid levels and are expected to rise by about 5 per cent annually for the next few years, driven by raw material prices and a tight construction labour market. As a result, new regional shopping mall space primarily consists of extensions and renovations of existing centres. While developers can’t build as many new centres, their existing ones benefit from more foot traffic and spending. Kate Bailey, CBRE’s head of retail and alternatives research in Australia, added that limited supply is helping buoy rents at regional malls and keeping a lid on vacancy. “Regional shopping centres are expected to see significant demand from occupiers. The amount of new space added to the market is well below 10-year averages which is driving rents and pushing vacancy down. Competition for new space is strong amidst growing sales densities and foot traffic,” she told Inside Retail. Neighbourhood and big-box centres take centre stage With little new regional mall space in the pipeline, the onus for increasing supply is going to be on neighbourhood shopping centres anchored by supermarkets and offering primarily necessities. CBRE puts the retail property pipeline at 1.77 million square metres over the next three years, the overwhelming majority of which is neighbourhood and large-format centres. “While overall consumer spending may have softened, compelling investment opportunities persist, particularly in growing residential corridors,” Ray White’s Rader said. “The future of retail success lies in its evolution, with convenience-based retail emerging as a dominant force. Supermarkets, specialty food retailers such as greengrocers, butchers, bakeries and artisanal food shops, alongside service-based businesses like hair salons and beauty establishments, are positioned to perform strongly. Traditional retail sectors, particularly clothing and soft goods, continue to rationalise their physical footprint as they adapt to increasing online shopping preferences. The retail sector’s investment resurgence in late 2024 has reignited investor interest after a period of subdued returns, though success will require embracing a reimagined retail landscape that caters to evolving consumer behaviours and preferences rather than traditional retail models.” Still the lucky country – for tenants and landlords Although not everyone likes the idea of rapid population growth, that ship has already sailed and it now represents a great opportunity for retailers to grasp while the iron is hot. Overseas migration is expected to slow, although neither major political party has articulated clear policies or targets. Even a proposed cap on international students, who comprised 40 per cent of the migration intake in 2024, couldn’t get through Parliament. Meanwhile, a solution to the housing crisis in Australia’s biggest cities seems nowhere in sight, so the growth in exurban and regional areas of the country should be a persistent theme over the medium term. This story first appeared in Inside Retail’s 2025 Australian Retail Outlook, powered by KPMG. You can download the full report here.