Is Australian retail property recovering in 2026?
Sentiment has improved — prime, dominant shopping centres are attracting buyers again as long-duration income assets. But on our model retail still carries the widest repricing gap of the major sectors: recorded values have lagged the move in interest rates by the most, so there's more capital softening to come before fair value is reached. It screens rich.
As with office, the average misleads — dominant, non-discretionary centres behave very differently from secondary discretionary retail. The recovery is real at the top end and thin below it.
Why does MPLC see more downside in retail than the market mood suggests?
Because we price off interest rates, not sentiment. High-profile centre sales lift the mood, but the model asks what yield the income should trade at given today's bond rate — and on that measure retail's market cap rate still sits furthest below fair value. Income cushions the total return; the capital value is where the risk sits.