03/01/2023 | by Edward F. Pierzak
Retail Header

Retail REITs own and manage retail real estate and rent space in those properties to tenants. Properties can include large regional malls, outlet centers, grocery-anchored shopping centers, and power centers that feature big box retailers.

The super-regional and regional mall space has experienced considerable consolidation, as well as a growing performance divide based on mall quality. Retail REITs offer access to best-in-class operators and higher quality centers.

Data from Nareit’s T-Tracker® shows that the retail sector posted an average quarterly funds from operations (FFO) decline of 21.0% from 2019 to 2020. In the third quarter of 2022, quarterly FFO exceeded its pre-pandemic (2019 average) level by 12.6%.

The retail landscape has changed dramatically with the continued growth of online sales. Over the next five years, Green Street forecasts that annual e-commerce and brick-and-mortar sales will likely grow by 6.5% and 2.8%, respectively.

Despite the considerable gains in e-commerce sales and its expected strong growth, retailers have increasingly appreciated the benefits that brick-and-mortar stores provide, including marketing, order fulfillment, and product returns.

  • 15%: According to Green Street, the e-commerce penetration rate was 15% of total retail sales in 2022.
  • 50%: Publicly-traded retail REITs tend to focus on better quality malls and control approximately 50% of U.S. malls by asset value.
  • 75%: Highlighting the value of brick-and-mortar stores, 75% of retailer Target’s online sales were fulfilled by its stores.

Below is a list of Nareit member companies from the retail sector.