Shopping Center REITs: An 'Essential' Bargain
Updated: Sep 10, 2020
Move aside, retail apocalypse. Despite being the primary "distribution center" to many suddenly-thriving essential retailers, shopping center REITs have plunged more than 40% in 2020 amid the ongoing coronavirus crisis.
Shopping Center REITs reported a 17.7% decline in same-store NOI growth in Q2 - by far the worst on record - as landlords struggled to collect rent from non-essential tenants.
13 of 17 shopping center REITs reduced or eliminated their dividend since the start of the pandemic. Federal Realty managed to increase its distribution to keep its five-decade-long streak alive.
The long-term outlook, however, looks far more positive than their enclosed regional mall peers, as leasing spreads remain firmly positive and rent collection has improved to above 80% in August.
While we’ve remained bearish on retail REITs, the magnitude and persistence of the sell-off in shopping center REITs appear unjustified, particularly among the higher-quality, grocery-anchored REITs.