Why Australia stopped building big-box retail

Australia's population has grown by more than 1.5 million people since 2020. Household spending at large format retailers – the likes of Bunnings, Harvey Norman, Officeworks – continues to climb. Yet the amount of new big-box retail space being built has virtually disappeared.

In Melbourne, new large format retail (LFR) supply is plummeting from an historical average of 50,000 square metres annually to just 8,000 sqm – some years delivering less floorspace than a single mid-sized Bunnings warehouse.

This isn't a local phenomenon. Across developed markets in the UK and U.S. also, rising construction costs, competition from residential projects, and complex planning frameworks have made new large format centres increasingly difficult to deliver.

Existing well-located centres are becoming more valuable as new supply struggles to materialise.

The implications for investors are profound.

"Retail floorspace per capita is continuing to decline as Melbourne's population heads towards 10 million by 2050, putting established, well-located centres in a position to capture sustained rental and capital growth," says Stuart Taylor, Senior Director of Retail Investments at JLL in Melbourne.

In Australia, the assets that define the nation's large format retail landscape –convenience-located, car-friendly retail precincts with national covenant tenants – are simply not being replicated.

Roughly 365 large format retail centres exist, comprising about 6 million sqm of retail space – a finite universe of assets that's barely growing.

_{Source: JLL research}

Melbourne's large format retail vacancy has fallen to 1.35%, which is the lowest rate in Australia and the lowest on record. Australian retail vacancy rates for the first half of 2026 are the lowest since 2018, with an average of 4.4% nationally across all sectors, according to JLL research.

This is a market where landlords are in the strongest position we've ever seen," says Taylor.

Over the past 12 months, Melbourne LFR rents have surged 6.9%, reflecting the highest annual increase in 15 years and the strongest performance of any retail sub-sector in Australia. Compare that to regional shopping centres (1.8% growth) or neighbourhood retail (1.5% growth) over the same period and the LFR story stands apart.

This outperformance is accelerating. In Q1 2026, Melbourne LFR rents grew 8.8% year-on-year, which is nearly double the growth rate from just 18 months earlier. 

Investors have noticed. Approximately $13 billion of retail property transacted in FY26, with retail accounting for roughly 42% of all commercial property investment – outselling both office and industrial for the second consecutive year.

"Major capital sources are re-weighting back towards retail after a sustained period of outperformance, and Australia is firmly part of that global shift," says Nick Willis, Executive Director of JLL Retail Investments, Australia and New Zealand.

The average retail transaction size climbed to approximately $124m in FY26, up 66% on FY25 and the highest on record. Twenty-nine transactions exceeded $100 million, with partial-interest deals hitting a record $4.6 billion as capital seeks exposure to scarce, high-quality assets.

_{Source: JLL research}

Large format retail isn't what it used to be, and that makes the supply scarcity even more acute. Since 2010, pet, baby, and toy stores, which you’d historically find in a LFR complex, have surged from 140 to 505 nationally. Sport and fitness retailers have doubled from 273 to 556. Hardware and tools have jumped from 621 to 919.

Modern large format centres are diversified ecosystems anchored by essential services, lifestyle retailers, and national covenants. As online shopping handles routine purchases, successful centres are evolving into community destinations. Large format precincts are increasingly anchored by experiential and service-based tenants such as gyms, pet care, dining, entertainment that give consumers reasons to visit beyond simply filling a shopping list.

The structural supply shortage has transformed existing large format centres into genuinely scarce assets.

"Epping Home & Life is one of only two assets valued above $100 million to be publicly offered in Victoria in the past decade," says Taylor of the recently launched 26,550-square-metre centre in Melbourne's north.

The rarity of such opportunities has intensified competition. Institutional investors, syndicators and private capital are now competing for assets that would rarely have changed hands a decade ago. For centres with strong covenants, long lease terms and established trade areas, there are more competitive bidders than at any point in the past five years.

"Competition for retail assets has been exceptional, with bidder participation well above the levels of two or three years ago," says Sam Hatcher, Head of JLL Retail Investments, Australia & New Zealand. "To secure scarce, high-quality assets with management, capital sources are sharpening terms and moving faster."

Globally, major retailers are consolidating into fewer, strategically located centres that deliver higher productivity. This reinforces the value proposition of well-positioned large format centres that combine accessibility, strong tenant covenants, and flexibility to accommodate evolving retail formats.

For investors holding quality large format retail assets in established locations, the supply-demand imbalance has created a market dynamic that favours landlords more than at any point in recent history. As population growth continues and new supply remains constrained, that dynamic shows no signs of reversing.