This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Retail REITs: Trouble Ahead

NEW YORK ( TheStreet) -- Industry trends in the retail-focused real estate investment trust sector have been improving, but trouble may yet be on the horizon.

Real estate investment trusts in the retail sector have suffered in recent years as consumers' cutbacks in discretionary spending led to softer demand for retail space. Many retail-focused REITS suffered through tenant bankruptcies and store closings, and some reduced the rents they charged to keep retailers.

While firms such as Developers Diversified Realty (DDR - Get Report), CBL & Associates Properties (CBL - Get Report) and Simon Property Group (SPG - Get Report) have reported improving occupancy and rental trends in their recent quarterly reports, there remains a few key obstacles for REITs that rent space to retailers. Perhaps the most important is consumer confidence.

The Thomson Reuters/University of Michigan index of consumer sentiment rose to 68.9 in August, from an eight-month low of 67.8 in July, but the uptick was less than expected. Soft consumer confidence often leads to pullbacks in consumer spending which is widely considered to account for 70% of the U.S. economy.

High rates of joblessness could mean the recent recovery in the REIT-retail sector was simply an anomaly, and not indicative of fundamental strengthening, according to equity research shop Stock Call.

Excluding auto and gasoline sales, U.S. retail sales fell 0.1% in July, though overall retail sales rose 0.4% last month after falling the previous two months.

Retail behemoth Wal-Mart Stores (WMT - Get Report) also poses a potential threat to retail REITs, the research firm noted.

Wal-Mart has been expanding into the grocery business, posing a threat to grocery store chains like Kroger (KR - Get Report) and Safeway (SWY). Grocery stores are generally the primary traffic anchors for retail developments and strip malls, Stock Call pointed out, and Wal-Mart's growing grocery business could steal grocery shopper traffic away from higher-priced chains.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ARI $15.84 0.57%
CBL $12.22 2.60%
DDR $18.04 1.70%
KR $34.99 -0.60%
SPG $207.62 1.30%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,052.63 -10.74 -0.52%
NASDAQ 4,730.8550 -32.3690 -0.68%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs