Kmart has secured its first standalone ‘K Home’ store in Australia, committing to a new-format concept that signals a material shift in the retailer’s growth strategy and the broader evolution of large format retail.

The circa 3,817sqm tenancy in Box Hill will see Kmart replace Decathlon, repositioning the space with a dedicated homewares and furniture offer. The deal was negotiated by Chris Parry of Leedwell in conjunction with Stuart Taylor of JLL as a landlord adviser, delivering a strategic and exciting repositioning strategy and demonstrating both the resilience and flexibility of Large Format Retail assets.

The format departs from Kmart’s traditional full-line stores, the Box Hill store represents the first trial of the ‘K Home’ format nationally, a standalone concept focused entirely on home living and the breadth of offering that Kmart has with its Anko products, including an expanded range of furniture and homewares products previously only available online.

Anko, quietly opened its first Asian store in Manila's Glorietta 2 shopping centre in November 2024, marking a pivotal moment for Australian retail on the global stage. Strategically, the move positions Kmart to capture further share of Australia’s $19 billion homewares and furniture market, increasingly competing with established operators such as IKEA, Amart Furniture, Freedom and Harvey Norman.

From a leasing perspective, the transaction highlights a structural theme playing out across the market, strong retailer demand coupled with a clear lack of available supply. Since 2020, the retail development pipeline has contracted materially, with new floorspace delivery reaching a 10-year low nationally in 2023. That constraint continues to present a challenge for expanding retailers seeking scale across Australia. Within the large format retail (LFR) sector specifically, there are currently approximately 365 centres nationally, comprising around 6,000,000sqm of total floorspace. The average LFR centre is circa 16,379sqm, reinforcing the relatively limited number of sites capable of accommodating large-scale occupiers. At the same time, vacancy across the sector has tightened significantly. While Victoria currently sits marginally above the national average, with vacancy increasing from 2.5% to 3.2% compared with 2.8% nationally, it remains near historic lows and continues to underpin competition for well-located assets.

Chris Parry, Partner at Leedwell, said “We’re continuing to see unprecedented demand from national retailers, but with a distinct lack of supply. Opportunities of this scale and quality are becoming increasingly difficult to secure, particularly as new development has slowed and vacancy remains at historically low levels.”

The introduction of the K Home format is particularly relevant in this environment. With a smaller and more flexible footprint than a full-line Kmart, the concept opens up a broader range of leasing opportunities across both shopping centres and large format retail assets, supporting quicker rollout potential.

This transaction not only delivers a strong covenant outcome for the asset but positions it at the forefront of Kmart’s next phase of growth, with the Box Hill store set to act as a benchmark for potential national expansion.

Stuart Taylor, Senior Director of Retail Investments at JLL, commented "LargeFormat Retail is emerging as one of the fastest growing asset classes for both private & institutional capital, driven by compelling investment fundamentals including strong tenant covenants, structural supply constraints, and historically low vacancy. This leasing transaction exemplifies that appeal - a Wesfarmers-backed tenancy delivering category expansion into a tightly held market. It's precisely these dynamics that are underpinning sustained leasing demand and rental growth across the sector."