The retail sector in Australia has been delivering relatively resilient results over the past few years, despite the effects of inflation and impacts of the COVID-19 pandemic. While the retail sector has remained strong, retail property valuations have been affected by capitalisation rate movements as well as liquidity issues. This has provided investors with opportunities to acquire retail properties at attractive price points, which are often well below replacement value.

During the past five years, retail sales, or turnover, in Australia has grown at a compound rate of 5.7 percent per year. While turnover was distorted somewhat between 2020 and 2022 because of COVID-19, the overall trend from 2019 through 2024 has been resilient.

In 2024, however, turnover growth in nondiscretionary retail sectors such as food retail (which includes supermarkets) and dining has outperformed discretionary sectors such as clothing and household goods.

This points to pressure on