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  • Alex Pettee, CFA

Shopping Center REITs: Too Far, Too Fast?

  • Too far, too fast? Shopping Center REITs have continued their post-vaccine resurgence into early 2021, surging another 30% this year and pushing stock prices back near pre-pandemic levels.

  • Shopping center REITs fared far better than their enclosed mall peers but still reported an average FFO/share decline of nearly 20% in 2020 while same-store NOI dipped over 10%.

  • Strong leasing activity in the back-half of 2020 confirmed that the long-term outlook for open-air strip centers remains far more promising than their enclosed regional mall peers.

  • It's too soon to declare victory. WWII-levels of fiscal stimulus powered retail sales to record highs in 2020, but while the "big boxes" are thriving, service-oriented "small-shop" retailers were annihilated by lockdowns.

  • While rent collection has improved considerably, it remains a few percentage points below "normal" levels at roughly 95%. Valuations currently appear extended as REITs that provided guidance see only modest growth in 2021.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at 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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