Among the uncertainty of the retail industry, open-air shopping centers have been outperforming. According to an index that tracks shopping center Real Estate Investment Trusts, shares of REIT’s that own and operate the sector of open-air shopping centers are up 7% since June 3rd. However, year to date, the sector is still down 14%.
“The retail industry is currently very unpredictable” said Keith Knutsson of Integrale Advisors.
An open-air mall is comprised of strip malls that don’t have enclosed walkways linking stores, food courts, and power centers which serve as broad, open, centers that include department stores and a few small tenants. It also includes community centers, which are neighborhood shopping centers that offer convenience oriented stores.
Retail landlords have been shaken up in recent years as the online shopping market dominates and major retailers continue to close stores. Occupancy rates declined in the first half of the year, however most 2017 store closures have already occurred due to the fact that tenants usually stay in the second half as they look to the year-end holiday profits. As a result, some REITs are gaining a lot of traction.
Federal Realty, a major REIT focusing on shopping centers, has recently announced a $345 million joint venture this month with Primestor Development Inc. This comes as an attempt to overtake a majority stake in a portfolio comprised of retail properties in several communities in Southern California.
Strip centers are not as susceptible to the shortcomings of the retail industry because they have less exposure to apparel retailers and offer more affordable leases for their tenants. Mall landlords are working harder to woo tenants that are more in tune with customer preference and provide a leisurely shopping experience.