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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