Flight to Quality in Retail Real Estate Expected Post-Crisis

Retail tenants will gravitate to malls and shopping centers that hold dominant positions within their local trade areas as they seek to ensure their profitability following the coronavirus crisis, according to an April 8 Moody’s Analytics webinar.

Robb Paltz, associate managing director at Moody’s Investor Service, said retail tenants “can’t gamble on malls that are speculative or have low traffic volume and are going to create very low margins for them.” He said he expects a “flight to quality” within the retail REIT sector in response to the coronavirus crisis.

In analyzing the viability of malls post-crisis, Paltz said tenants will be looking at how population and income demographics support the mall. In addition, focus will also be on whether the mall pivoted pre-crisis to embrace “the new era” of experiential retail. “If you’re not one of those malls that did that before the crisis it’s going to be a lot harder to attract tenants after the crisis,” he added.