Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Retail REITs: Fears Of Retail Apocalypse 2.0

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  • Amid the strongest year of brick-and-mortar retail sales since 2012, Retail REITs appeared to be turning the corner last year. Suddenly, there are fears of another “retail apocalypse."

  • 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 and specialty retailers.

  • More than 7,000 store closings have been announced this year, already topping 2018 total. Research firm Coresight projects up to 12,000 closings by year-end, primarily concentrated in the mall segment.

  • The bifurcation between top-tier and lower-tier retail REITs continues to widen as retailers focus investments into the highest productivity locations. Grocery-based and hardline retail categories have been the standouts.

  • While 1Q19 earnings were decent for retail REITs, 2019 is shaping up to be a tough year. Mall REITs are the lone real estate sector sitting out the REIT Rejuvenation.

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