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Business Insights | Could large format retail be the unlikely solution to Australia’s housing crisis?
Building an 800-unit apartment complex above a large format retail store like Costco is a reality in the US, but there needs to be the right conditions for it to work here.
December 8, 2025
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A trip to Costco would normally mean clearing out the car before making a dedicated trip to the nearest outlet for bulk replenishments of tissue paper and rotisserie chicken.
But what if the chore didn’t have to be that way? What if one could simply take an elevator down a few floors from their home to retrieve their desired household needs whenever they wanted?
This concept isn’t a pipe dream. In the US, the retail giant is building an 800-unit apartment complex above a new store in Los Angeles as a pilot project for mixed-use development, with 184 units designated for low-income households.
The project, which is the first of its kind for Costco in the US, will feature amenities like a rooftop pool, gym, gardens and communal spaces. The unique development also aims to address the region’s housing crisis while creating local jobs.
It warrants the question of whether this strategy can be applied to Australia, where the marriage of large format retail with residential becomes one potential solution to Australia’s housing crisis.
That answer is reflected in CBRE’s latest report: Apartment Vacancy and Rent Outlook H2 2025.
Our leading researchers forecast that the future supply of apartments is set to hover around 60,000 per annum over the period of 2025 to 2030. Australia’s forecast population growth requires apartment supply of circa-75,000 per annum to avoid further falls in vacancy.
In addition to this, demand for housing over the next decade is expected to benefit from the triple boost of rising population, jobs and income.
“We see circa-$960 billion of additional income in the system to support mortgage, rents and other living expenses,” says Sameer Chopra, CBRE’s Pacific Head of Research.
“We expect capital city vacancy will fall further to 1.1% by 2030 from 1.8% in 2025. These tight conditions will endure as vacancy stays at around half of the previous decade average of 2.5%.”
For specific rental outlook, CBRE data indicates that median rents will grow by 24% between 2025 to 2030, across 53 precincts in Australian capital cities. By 2030, 92% of 2-bed apartments are forecast to have rents exceeding $700/week with 33% exceeding $1000/week.
The latest commentary from CBRE’s Pacific leaders from our Talking Property: House View Q4 podcast, highlighted that one of the biggest grievances for retail occupiers today is lack of trading after 5 o'clock.
This is driving shopping centres to experiment by adding gyms and evening dining options to drive traffic after hours. In addition to this is the growing momentum for mixed-use shopping centres developments. This year’s reporting season highlighted a building pipeline of apartments on shopping centre sites, particularly in Sydney. The figure? Almost 8,000 new apartments planned on shopping centres.
While mixed-use developments combining residential, commercial and community spaces are commonplace across Australian cities, the large format retail residential concept still needs an opening and ideal timing to be locally trialled.
“The two are quite similar in approach,” explains Sameer, who notes that 800-units is actually a small number on a US scale.
“Companies do it very often over there. But the first place you want to see this happening in Australia is around large suburban shopping centres.
“Having said that, I don’t think large format retail residential will be front of mind at the moment. Because all the residential developers are focused along the train line, as outlined in our latest Metrofication 2.0 report.
“To accomplish that large format retail idea, the developments would need to be in a Transport Oriented Development (TOD) zone – places where the government has pre-approved development to go high. That’s typically in a transport corridor as opposed to around a large format retail asset. But if the large format retail happens to be in a transport zone, then you could do it. It’s already challenging enough trying to build a normal apartment at the moment.”
CBRE’s latest Metro research also explains why there’s such a strong focus on the TOD zones when it comes to residential development.
The delivery of the new train network was expected to drive demographic shifts across the city. Primarily, the convenience and connectivity provided by the new Metro train system would attract residential development, which in turn would drive population growth around Metro stations. It’s a factor additionally supported by amended TOD planning controls which will be implemented within 400 metres of 37 transport stations across the city.
“Over the next 15 years, the amended controls are expected to deliver 170,000 new homes. Nine of the selected areas are Metro station suburbs,” says Sameer.
But what if the chore didn’t have to be that way? What if one could simply take an elevator down a few floors from their home to retrieve their desired household needs whenever they wanted?
This concept isn’t a pipe dream. In the US, the retail giant is building an 800-unit apartment complex above a new store in Los Angeles as a pilot project for mixed-use development, with 184 units designated for low-income households.
The project, which is the first of its kind for Costco in the US, will feature amenities like a rooftop pool, gym, gardens and communal spaces. The unique development also aims to address the region’s housing crisis while creating local jobs.
It warrants the question of whether this strategy can be applied to Australia, where the marriage of large format retail with residential becomes one potential solution to Australia’s housing crisis.
Housing challenges in numbers
Why would such a radical solution be considered in Australia?That answer is reflected in CBRE’s latest report: Apartment Vacancy and Rent Outlook H2 2025.
Our leading researchers forecast that the future supply of apartments is set to hover around 60,000 per annum over the period of 2025 to 2030. Australia’s forecast population growth requires apartment supply of circa-75,000 per annum to avoid further falls in vacancy.
In addition to this, demand for housing over the next decade is expected to benefit from the triple boost of rising population, jobs and income.
“We see circa-$960 billion of additional income in the system to support mortgage, rents and other living expenses,” says Sameer Chopra, CBRE’s Pacific Head of Research.
“We expect capital city vacancy will fall further to 1.1% by 2030 from 1.8% in 2025. These tight conditions will endure as vacancy stays at around half of the previous decade average of 2.5%.”
For specific rental outlook, CBRE data indicates that median rents will grow by 24% between 2025 to 2030, across 53 precincts in Australian capital cities. By 2030, 92% of 2-bed apartments are forecast to have rents exceeding $700/week with 33% exceeding $1000/week.
Can this solution work in Australia?
Apartments tied to large format retail spaces is a novel concept which could work in theory in Australia, but it will take time to evolve from where the main priority lies at the moment: Mixed-use residential developments.The latest commentary from CBRE’s Pacific leaders from our Talking Property: House View Q4 podcast, highlighted that one of the biggest grievances for retail occupiers today is lack of trading after 5 o'clock.
This is driving shopping centres to experiment by adding gyms and evening dining options to drive traffic after hours. In addition to this is the growing momentum for mixed-use shopping centres developments. This year’s reporting season highlighted a building pipeline of apartments on shopping centre sites, particularly in Sydney. The figure? Almost 8,000 new apartments planned on shopping centres.
While mixed-use developments combining residential, commercial and community spaces are commonplace across Australian cities, the large format retail residential concept still needs an opening and ideal timing to be locally trialled.
“The two are quite similar in approach,” explains Sameer, who notes that 800-units is actually a small number on a US scale.
“Companies do it very often over there. But the first place you want to see this happening in Australia is around large suburban shopping centres.
“Having said that, I don’t think large format retail residential will be front of mind at the moment. Because all the residential developers are focused along the train line, as outlined in our latest Metrofication 2.0 report.
“To accomplish that large format retail idea, the developments would need to be in a Transport Oriented Development (TOD) zone – places where the government has pre-approved development to go high. That’s typically in a transport corridor as opposed to around a large format retail asset. But if the large format retail happens to be in a transport zone, then you could do it. It’s already challenging enough trying to build a normal apartment at the moment.”
CBRE’s latest Metro research also explains why there’s such a strong focus on the TOD zones when it comes to residential development.
The delivery of the new train network was expected to drive demographic shifts across the city. Primarily, the convenience and connectivity provided by the new Metro train system would attract residential development, which in turn would drive population growth around Metro stations. It’s a factor additionally supported by amended TOD planning controls which will be implemented within 400 metres of 37 transport stations across the city.
“Over the next 15 years, the amended controls are expected to deliver 170,000 new homes. Nine of the selected areas are Metro station suburbs,” says Sameer.
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