Mall REITs: Get Busy Livin' Or Get Busy Dyin'

• Mall REITs have been conspicuously absent from the ‘REIT Rejuvenation.’ The lone sector in negative territory this year, mall REITs are on pace to underperform for the fourth straight year.

• Retail apocalypse 2.0? Store closings have unexpectedly surged in 2019 as the combination of higher minimum wages, tariff-related cost pressures, and heavy discounting have pressured margins at softline retailers.

• The casualties continued to mount last quarter as more than 7,500 store closings have been announced this year with mall-based retailers being hit especially hard.

• Retail sales data – and mall sales productivity - has actually been solid this year. Accelerating since 2016, sales per foot grew 4.4% in the second quarter.

• The bifurcation between top-tier and lower-tier mall REITs continues to widen. While some malls are thriving, we believe that dozens of low-productivity malls are a recession away from extinction.

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