Shopping Centre REITs Hold Australia's Housing Solution

After 25 years in financial services and technology, I've witnessed countless market inefficiencies that create extraordinary opportunities for those who recognise them first.

Australia's housing crisis presents one such opportunity. While traditional developers struggle with capital constraints and site acquisition costs, shopping centre REITs sit on billions of dollars worth of prime real estate along transit corridors, perfectly positioned to deliver the mixed-use housing solutions our market desperately needs.

The numbers tell a compelling story for CFOs, brokers, and investors willing to think beyond conventional development models.

The Market Reality

Australia delivered just 177,000 new homes in 2024, falling significantly short of the 223,000 required annually to meet demand. We're tracking toward a 375,000-home deficit by mid-2029, representing a market failure of extraordinary proportions.

Housing affordability stress has nearly doubled from 19% in 2013-14 to 36% in 2023-24. Record-low satisfaction levels of just 22% of Australians satisfied with their housing situation in 2024 demonstrates the scale of unmet demand.

This represents a $375 billion financing opportunity that traditional residential development models cannot address efficiently.

The REIT Advantage

Shopping centre REITs possess three critical advantages that traditional residential developers lack: established cash flows, existing land holdings, and proven mixed-use development expertise.

Australia operates 1,630 existing shopping centres, including 78 regional centres strategically located along transport corridors. Centres located on larger sites, close to transport and in areas where residential rents are high, are early candidates for mixed-use redevelopment. Many occupy oversized sites designed for car-dependent retail models that no longer optimise land use efficiency.

NSW's Transport Oriented Development program demonstrates the pathway forward. The policy framework will deliver up to 185,800 new homes through two-phase expansion through mixed-use developments near transport hubs, with building heights up to 24 metres for developments containing commercial ground floors. The program targets development within 400 metres of 37 metro and rail stations across NSW, with streamlined planning controls that incentivise mixed-use development.

Shopping centres already occupy these prime locations.

The Financing Asymmetry

Traditional residential developers face three fundamental constraints: limited capital access, escalating site acquisition costs, and extended development timelines. Shopping centre REITs sidestep all three.

They already control the land. Their diversified rental income from established commercial tenants provides stable cash flows to support development financing. Their operational experience in managing mixed-use properties reduces execution risk for lenders.

Most importantly, mixed-use developments generate dual revenue streams from both commercial and residential components, creating financing structures that pure residential developments cannot match.

For CFOs evaluating development opportunities, this represents a fundamental shift in risk-return profiles. Established REITs with proven track records in property management present significantly lower counterparty risk than speculative residential developers.

Implementation Framework

The opportunity requires specialised financing structures that recognise the unique characteristics of mixed-use REIT developments. Global financiers understand these models well, having deployed similar strategies across North American and European markets.

Lenders need to develop expertise in evaluating dual-income developments where commercial ground floor tenants provide stable base returns while residential components capture housing demand premiums.

Success stories are already emerging. Vicinity Centres is transforming Bankstown CBD into a Health and Education Innovation Precinct through mixed-use development, while similar projects across Melbourne and Brisbane demonstrate the model's viability. Major landlords including Scentre Group and Vicinity Centres are actively integrating residential, commercial, and retail in mixed-use schemes at shopping centre sites, collaborating directly with the NSW Government. Scentre Group reported record occupancy and active development pipeline in 2024, with urban density and mixed-use plans around Westfield shopping centres.

The Australian government's $25 billion housing investment commitment over the next decade creates unprecedented funding alignment for these developments, including bonus programs for states and territories that exceed building targets. NSW's complementary Low and Mid-Rise policy aims to unlock 112,000 homes in five years, creating additional density opportunities that align with shopping centre redevelopment strategies.

The Commercial Opportunity

This represents a new asset class with compelling characteristics: established borrowers with proven track records, diversified income streams, and government policy support.

For lenders, shopping centre REIT mixed-use developments offer lower-risk exposure to Australia's housing growth story compared to traditional residential development financing.

For real estate investors, the model provides access to both commercial property stability and residential growth potential within single investment structures.

Moving Forward

The housing crisis demands solutions that leverage existing market strengths rather than creating new inefficiencies. Shopping centre REITs possess the financial capacity, strategic locations, and operational expertise to deliver housing at scale.

They need financing partners who understand their unique advantages and can structure capital solutions that recognise dual revenue stream opportunities.

The opportunity sits in plain sight across 1,630 shopping centres nationwide. The question is whether Australia's financial services industry will recognise this asymmetry before international capital does.

After building technology solutions that transformed global markets trading, I've learned that the biggest opportunities often hide in the most obvious places.

Australia's housing solution might already be parked outside your local shopping centre.

References

1. Australian Property Update. "Crisis: The State of Australia's Housing System in 2025." https://australianpropertyupdate.com.au/apu/crisis-the-state-of-australias-housing-system-in-2025

2. Gallup. "Australians' Housing Crisis: Dreams Turn to Nightmares." https://news.gallup.com/poll/655625/australians-housing-crisis-dreams-turn-nightmares.aspx

3. CBRE Australia. "Shopping Centres Australia 2024." https://www.cbre.com.au/insights/reports/shopping-centres-australia-2024

4. NSW Department of Planning and Environment. "Transport Oriented Development Program." https://www.planning.nsw.gov.au/policy-and-legislation/housing/transport-oriented-development-program/transport-oriented-development

5. Vicinity Centres. "Bankstown CBD Transformation." https://www.vicinity.com.au/

6. NSW Department of Planning and Environment. "Transport Oriented Development Program [PDF]." https://www.planning.nsw.gov.au/sites/default/files/2023-12/transport-oriented-development-program.pdf (December 2023)

7. NSW Parliament. "Development of the Transport Oriented Development Program." https://www.parliament.nsw.gov.au/committees/inquiries/Pages/inquiry-details.aspx?pk=3035 (22 February 2024)

8. Two Birds. "From Shopping Centres to Mixed-Use Projects." https://www.twobirds.com/en/insights/2025/australia/from-shopping-centres-to-mixed-use-projects (8 May 2025)

9. Shopping Centre News. "Scentre Group reports strong operational growth in 2024." https://www.shoppingcentrenews.com.au/latest-news/industry-news/scentre-group-reports-strong-operational-growth-in-2024-amid-expansions-and-high-occupancy-rates/ (12 November 2024)

10. NSW Department of Planning and Environment. "Low and Mid-Rise policy to unlock 112000 homes in five years." https://www.planning.nsw.gov.au/news/low-and-mid-rise-policy-to-unlock-112000-homes-in-five-years (20 February 2025)