THERE are only 16 more shopping days until Christmas, and while interest rates have been cut, landlords and tenants are ending the year on a mixed note.

Investments in the sector have been strong, albeit from a low base, with the Top Ryde shopping centre being the biggest sale of the year.

In the coming year, development will dominate the retail sector, led by Westfield, AMP Shopping Centres, CFS Retail Fund and Stockland.

All the major owners have ear-marked the regional centres as the growth corridors, despite tenants feeling the pressure from the internet and cautious consumers.

One of the latest projects is the DFO Homebush, which is set to become Sydney's first combined factory outlet and homemaker centre, with the start of a $100 million redevelopment to expand its Australian, international and luxury retail offering.

The site will expand from 86 stores on a single level to 126 stores across two levels. The centre will feature 90 fashion retailers, including the recently opened Armani and Zegna, along with 18 bulky goods and homewares stores, and a 475-seat food court.

In another development, there will be a range of new shops, bars, cafes and restaurants at the new 161 Castlereagh Street and Legion House site, to be known as ANZ Bank Tower (see artist's impression).

Landlords still get cash from a mall as they generate revenue from areas such as the movies, car parking fees and general advertising around the centres. These streams of money help offset any declines in rent from tenants.

According to agents, the trend to change shopping centres into almost theme parks will boost investment activity next year.

More than $500 million in transactions were recorded in the third quarter, according to the National Retail MarketView from CBRE.

Private investors dominated activity, with rental growth supporting capital values, the senior research manager of retail at CBRE, Tammy Smith, said.

"The defensive nature of retail assets has been reaffirmed by the fact that retail rents have still been growing, albeit slowly, post the GFC," Ms Smith said.

"While weaker consumer confidence, lower levels of debt accumulation and reduced dwelling approvals have dampened spending on household goods, we're now seeing that savings rates have stabilised and there has been a marginal improvement in consumer confidence. Dwelling approvals appear to have bottomed, with potential for some improvement after the interest rate cuts. All of these factors are expected to support a continued gradual improvement in rental growth in most markets."

CBRE's data shows sales momentum increased this year, with a 29 per cent improvement in total transactions in the year to September 30 compared with the same period last year. This was well above the transaction levels recorded in 2008 and 2009.

The national director of retail investments at CBRE, Steve Lerche, said there was particularly strong interest at the lower end of the market, with sub-$30 million deals accounting for 45 per cent of total retail transactions in the third quarter - up 54 per cent year-on-year.

The director of city sales at Knight Frank, John Bowie Wilson, said the sector has had vacancy levels drop to a low of 2.9 per cent as at November this year.

He said this was due to the changing retail mix, thanks to the opening of international brands.

Within the retail centres, clothing and soft goods is the predominant sub-class, despite the drop in discretionary spending.

"The largest change in the CBD has been the emergence of concept stores and international retailers' requirement for flagship locations, which has grown the store footprint from the traditional CBD retailers," Mr Wilson said.

"There have been limited investment choices in the CBD, strata retail property transactions down 20.6 per cent (to date) compared with the same period last year, and those transactions are ranging in yields from sub-3.5 per cent to 8 per cent, depending on the profile of the location."