04/21/2017 | by
Allen Kenney

NAREIT’s Calvin Schnure discusses the impact of REITs’ efforts to adapt to shifts in consumer shopping behavior.


In the latest episode of The REIT Report: NAREIT's Weekly Podcast, Calvin Schnure, NAREIT’s senior vice president for research and economic analysis, discussed the health of the retail REIT sector.

Schnure stressed that changes in shopping habits as a result of the growth of e-commerce have affected some types of properties more than others. Notably, older shopping centers and malls are most vulnerable to the shifts, especially those in areas with lower job growth in the last decade. On the other hand, many newer developments in higher-income locales with better job growth “are doing well,” according to Schnure. He emphasized that REITs primarily own these newer properties in more upscale markets.

“REITs have always occupied the upper portion of the quality spectrum, so this is a place where they’ve been well positioned from the very beginning,” Schnure said.

In terms of how REITs are adjusting to the changes in the retail environment, Schnure said REITs haven’t had much trouble replacing departed tenants. In fact, they’re looking for more productive tenants to fill the empty spaces. These include tenants that can enhance the “experience” of going to a mall or shopping center, providing services such as new dining options, movie theaters and fitness clubs.

Retail REITs are also continuing to invest in improvements to their properties, according to Schnure. “It’s a lot more enjoyable to walk into a mall or shopping center if it has nice finishings and interesting stores and reasonable traffic flow,” he noted.

Schnure offered evidence that retail REITs’ strategies for addressing the shifts in consumer spending are working. Funds from operations for retail REITs were up more than 6 percent in 2016 over 2015. Retail REITs paid $9.4 billion in dividends in 2016, an increase of nearly 8 percent over 2015. Furthermore, their occupancy rate has held steady near a record high of 96 percent.

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