Sydney Retail Market Dynamics Q2 2026

• H1 2026 vacancy shows mixed results. 
• No new supply was added in Q2 2026.
• Rents increased across all sub-sectors; yields remain stable. 

Regional vacancy remained stable in H1 2026, but increased marginally across sub-regional and neighbourhood centres, while Sydney CBD and large format retail vacancy rates trended downwards. Household spending in NSW increased by 4.5% y-o-y to May 2026. Seasonally adjusted, spending increased across most categories, except transport (-1.4%) and recreation and culture (-0.1%), due to rising fuel costs and prioritization of non-discretionary spending.

One completion was recorded in Sydney, the refurbishment of HomeCo Caringbah, which added no additional stock to the market. We are currently tracking 133,700 sqm of retail stock that is under construction across Sydney. The development pipeline is concentrated in neighbourhood centres (55,900 sqm), followed by sub-regional centres (30,000 sqm).

Gross rents increased across all subsectors during the quarter, ranging from 0.50% to 7.43%. Once again, large format retail recorded the highest growth across the sub-sectors. Yields remained stable across all sub-sectors. NSW achieved the highest overall sales volumes nationally at AUD 1.0 billion in Q2 2026 and AUD 1.6 billion year-to-date. The largest transaction recorded in Q2 2026 was Macarthur Square (AUD 568.0 million), which sold as part of the APPF - GPT Super Regional portfolio.

Retail supply chains could be vulnerable to elevated freight, logistics, and energy costs amid ongoing global uncertainty, which could result in some delayed goods coming into the country. This is not expected to be a widespread concern. Driven by population growth and new residential developments, large format retail is expected to continue to perform amidst continued tenant demand and low vacancy rates across the sub-sector.