Most REITs specialize in a particular part of commercial real estate, and retail REITs are no different. However, there is a wide variety within the retail aspect. Different categories of retail REITs may come with more risk than others so you need to know what you’re dealing with before you dive right in.
What are Retail REITs?
Retail REITs own, manage, or lease in the retail aspect of real estate. Renting space to their tenants is how they make the majority of their income. Some retail REITs may include:
- Shopping Malls
- Big Box Stores
- Drug Stores
- Outlet Centers
- Service Centers
- Grocery Shopping Centers
- Boutiques
- Home Improvement Stores
Each type of retail REIT has varying degrees of risk. However, in a more broad sense, there are some similar benefits and risks to each.
Benefits of Retail REITs
Lease Structure: Freestanding retail REITs have long-term tenants. They have triple net (NNN) leases spanning 10 or even 20 years. The tenants are responsible for their monthly rent plus other expenses such as operating, insurance, taxes, and maintenance costs. These tenants are generally well-established companies with a predictable cash flow. Defaulting on their rent is highly unlikely, even with periodic rent increases.
Anchor Tenants: Shopping malls, outlet centers, and grocery centers are ideal places for anchor tenants. These are the main stores that make up the most revenue and attract customers to the area. Hence, other stores will want to be in this prime location too – making vacancies unlikely.
Necessity: Whether offering needed services, discount goods, food, or even specialized products, there is always going to be a need for brick and mortar stores. Even as online shopping becomes more and more prevalent, people want to shop in person and will continue to do so.
Risks of Retail REITs
Interest Rates: Interest rates are always going to be a risk. When interest rates are high, it can badly influence REIT stock prices. Investing in income-focused stock of course holds risk. That’s why you have to be smart about how and when you invest.
The Economy: While most retail REITS are fairly recession-resistant, there are some categories that are recession prone. Many small businesses can be recession-prone if they offer expensive goods that bigger chains can offer cheaper. If a store’s services are more of a luxury than a necessity they could be in trouble too. When the economy is bad, people look for the best prices and the most essential goods and services. Some retail stores just can’t compete.
Overall, retail REITs can offer a huge possibility of long-term and consistently high returns. There are so many aspects within retail real estate to explore and keep in mind. Make sure you understand your risk – and how handsomely you can be rewarded.
Best Retail REITs
| Ticker | Company | ±% | Price | Invest | ||
|---|---|---|---|---|---|---|
Industry Overview
| Number of REITs | 32 |
| Average Dividend Yield | 5.24% |
| YTD Total Return | -0.62 |
| April Total Return | 7.03% |
| 2022 Total Return | -13.29% |
Quarterly Performance Data
| Financial Metric | Q1 2023 | 2023 YTD |
|---|---|---|
| FFO ($M) | $3,663 | $3,663 |
| NOI ($M) | $4,616 | $4,616 |
| Dividends Paid ($M) | $2,436 | $2,436 |
| SS NOI | 2.68% | |
| Occupancy Rate | 96.43% |
All Retail REITs
| Ticker | Company Name | Market Cap | Dividend Yield |
|---|---|---|---|
| ADC | Agree Realty | $5.945B | 4.15% |
| AKR | Acadia Realty Trust | $1.644B | 4.57% |
| BFS | Saul Centers | $1.248B | 6.15% |
| BRX | Brixmor Property Group | $6.726B | 4.59% |
| EPRT | Essential Props Realty | $3.532B | 4.61% |
| FCPT | Four Corners Property | $2.217B | 5.21% |
| FRT | Federal Realty Investment | $8.281B | 4.27% |
| GTY | Getty Realty | $1.606B | 5.34% |
| KIM | KIMco Realty | $12.42B | 4.56% |
| KRG | Kite Realty Gr Trust | $5.279B | 4.08% |
| MAC | MACerich | $2.828B | 5.27% |
| NNN | National Retail Props | $7.349B | 5.33% |
| O | Realty IncOme | $39.656B | 5.04% |
| PINE | AlPINE Income Prop Trust | $259.044M | 6.47% |
| REG | Regency Centers | $11.225B | 2.95% |
| SITC | SITE Centers | $2.923B | 3.72% |
| SKT | Tanger Factory Outlet | $2.426B | 4.17% |
| SPG | Simon Property Group | $43.701B | 5.90% |
| SRC | Spirit Realty Capital | $5.543B | 6.58% |
| SRG | Seritage Growth Props | $515.406M | n/a |
| UBA | Urstadt Biddle Properties | $889.462M | 3.66% |
| UE | Urban Edge Props | $2.128B | 3.71% |
REIT Alternatives
REITs provide a low-cost and simple way to invest in real estate. However, they aren’t the only option available to generate passive income through real estate with a low minimum investment.
Real estate crowdfunding offers investors the ability to decide which properties they want to invest while still enjoying passive income at a fraction of the cost of traditional methods of investing in real estate. Here are some of our favorite real estate crowdfunding platforms:
