Retail REITs own and manage retail real estate and rent space in those properties to tenants. Properties include large regional malls, outlet centers, grocery-anchored shopping centers, and power centers that feature big box retailers. Despite the considerable gains in e-commerce sales and their expected strong growth, retailers have increasingly appreciated the benefits that brick-and-mortar stores provide, including marketing, order fulfillment, and product returns.
Green Street assigns grades to U.S. regional and super-regional malls. The best malls are assigned grades of A- or better; approximately 25% of malls are A-rated. The outlook for these malls tends to be bright; they also are attractively priced. Over half of U.S. malls are assigned grades of B- or worse. These malls typically face dim prospects. Publicly-traded retail REITs tend to focus on better-quality malls.
New trade policies may have elevated economic uncertainty and financial market volatility, but the net REIT investment performance effects related to tariff actions have been considerably more tempered than many investors feared. The FTSE Nareit All Equity REITs Index posted a year-to-date total return of 4.1% through August 2025. Over the same time period, the retail sector ranked sixth among the 13 public equity REIT property sectors; its total return was 5.1%.
Data from Nareit’s quarterly REIT Industry Tracker show that retail property operations have remained strong. As of the second quarter of 2025, average year-over-year funds from operations (FFO), net operating income (NOI), and same-store net operating income (SS NOI) increased by 5.1%, 5.1%, and 4.0%, respectively. The average retail occupancy rate was 96.6%, the highest rate among the four traditional property types.
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