• Alex Pettee, CFA

Shopping Center REIT Sector Overview

  • Big Box Is Back: The COVID pandemic has radically transformed consumer spending habits - perhaps permanently - shifting spending towards goods over services and towards larger-format retailers over smaller shops.

  • While enclosed regional malls face a long and uncertain road to recovery, the outlook for open-air Shopping Center REITs has brightened considerably this year. Recent earnings results have been impressive.

  • Rent collection has fully normalized and trends in occupancy rates and leasing have been encouraging. 9 REITs raised guidance in Q2 and a full earnings recovery appears likely by late-2022.

  • It took a few years, but Big Box retailers have learned to compete effectively in the e-commerce era. Shopping centers are becoming hybrid distribution centers in a decentralized last-mile delivery network.

  • We've seen the "animal spirits" come alive with several mergers, an IPO, and signs that external growth will be reignited. While not bargains, valuations have become incrementally more attractive as the share price rally has cooled while fundamentals have heated up.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

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