REIT market's retail sector holding up

Nov 20, 2011 @ 12:01 am

By Jeff Benjamin

To hear it from the perspective of retail-sector real estate specialists, it might be easy to assume that the U.S. economy is moving full-steam ahead, and that bodes well for investors in retail properties, particularly outlet centers.

“Retail sales are holding up well because consumers are still spending,” said David Henry, president and chief executive of Kimco Realty Corp. “People are tired of being scared, and 90% of them are still working.”

Mr. Henry was part of a panel discussion last week in Dallas at the National Association of Real Estate Investment Trusts' annual convention.

Panel moderator Jeffrey Donnelly, managing director of equity research at Wells Fargo Securities LLC, pointed out that the retail segment has been one of the strongest REIT sectors since the recovery began in March 2009.

But though the story for the retail sector is rosy on the surface, a closer look exposes some unique challenges for REITs and investors, according to panelist Sandeep Mathrani, chief executive of General Growth Properties Inc.

Elaborating on a reference to a barbell, which underscores strong retail sales at both the high-end and at the deep-discount end of the market, he pointed out that luxury goods continue to do well because unemployment is still relatively low for better-educated consumers.

LOTS OF MOMENTUM

In terms of where consumers are spending their money, panelist Steven Tanger, president and chief executive of Tanger Factory Outlet Centers Inc., said that outlet shopping centers have plenty of momentum.

“In tough times like these, people like a bargain, but they also gravitate to brand names,” he said.

Mr. Tanger also suggested that there is an evolution coming to the outlet space, which continues to create investment opportunities for real estate investors.

“It used to be that outlet centers were located two hours away from metropolitan areas, but now they're sometimes as close as 10 miles away,” he said.

The total U.S. footprint for outlet centers is about 50 million square feet in 150 outlet centers, Mr. Tanger said.

In Chicago alone, retail-shopping space covers 170 million square feet.

“I could see the number of outlet centers growing to 250 in the next two years,” Mr. Tanger said. “Any [retailer] trying to grow has part of the focus on the outlets.”

The Nareit conference, REIT World 2011, attracted more than 1,200 attendees, including REIT executives, portfolio managers and investment bankers, all seeking nuggets of information about the real estate market.

Email Jeff Benjamin at jbenjamin@investmentnews.com

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

Amy Florian: Issues with elder abuse and diminished capacity

As clients age, they become increasingly susceptible to diminished capacity and/or elder abuse. Amy Florian of Corgenius explains the nature and causes of diminished capacity and the signs to watch for.

Latest news & opinion

Retirement planning for women

Longer lifespans and lower savings require creative income strategies.

Sean Spicer resigns as press secretary after Anthony Scaramucci is appointed communications director

Scaramucci is known as an ardent foe of the DOL fiduciary rule, having said during the campaign that Trump would repeal it .

Redoing the math on a 4% retirement withdrawal rate

Given the current interest-rate environment and other factors, advisers disagree about whether the number is too conservative or not conservative enough.

House panel passes bill to replace DOL fiduciary rule with one requiring disclosure of conflicts

Measure likely to continue in partisan advance in House, but could stall in Senate.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print