Melbourne’s retail investment activity to gain momentum

Additionally, regional yields are expected to tighten before year-end.

With returned investor confidence to Melbourne’s retail sector and a subdued supply pipeline, JLL said in a report that high levels of investment activity are forecast to continue.

Moreover, the report noted that regional yields are forecast to tighten slightly before end-2025 and continue to compress throughout 2026. Neighbourhood and subregional yields are forecast to remain stable throughout the next 12 months.

Here’s more from JLL:

Demand for food-related retailing remains high while fashion and discretionary retailing continues to remain stagnant. Construction costs associated with fit-outs of new tenancies and the cost of doing business are the key deterrents for retailers opening new stores.

Victoria’s year-on-year retail trade growth in May was 3.9%, the second highest nationally and above the national average of 3.4%.

All subsectors apart from Sub-regional recorded a decline in vacancy

There was no new supply in Q2 2025. Construction costs and delays continue to suppress new supply with two completions expected this quarter pushed back to Q3 2025.

All subsectors recorded a decline in vacancy except sub-regional, which recorded a 2.3% increase. This was largely attributed to closures stemming from retailers entering voluntary administration that primarily operated within sub-regional centres.

Investment volumes for 2025 surpass total investment in 2024 by over AUD 300 million

All subsector midpoint and median yields remained stable in Q2 2025. The Neighbourhood subsector remains the lowest at 5.75%, attributed to its high proportion of non-discretionary tenants compared to other subsectors.

Quarterly transaction volumes totalled AUD 1.1 billion across 15 transactions. As of Q2 2025, annual investment volumes total AUD 1.7 billion, already surpassing the 2024 total investment volume of AUD 1.3 billion by over AUD 300 million.