Best Retail REITs

Retail REITs are companies that own and manage a portfolio of retail properties, such as shopping centers, malls, or standalone stores. By investing in retail REITs, investors can benefit from rental income generated by these properties, as well as potential capital appreciation as property values increase over time.

It's important for investors to conduct thorough research before investing in retail REITs, as the retail sector can be susceptible to economic downturns and changing consumer preferences. Factors such as location, tenant quality, lease terms, and industry trends should all be considered when evaluating retail REITs.

What are Retail REITs?

Retail REITs own, manage, or lease in the retail aspect of real estate. Renting space to their tenants is how they make most of their income. Some retail REITs may include:

• Shopping Malls
• Big Box Stores
• Drug Stores
• Outlet Centers
• Service Centers
• Grocery Shopping Centers
• Boutiques
• Home Improvement Stores

Each type of retail REIT has varying degrees of risk. However, in a more broad sense, there are some similar benefits and risks to each.

Benefits of Retail REITs

• Lease Structure: Freestanding retail REITs have long-term tenants. They have triple net (NNN) leases spanning 10 or even 20 years. The tenants are responsible for their monthly rent plus other expenses such as operating, insurance, taxes, and maintenance costs. These tenants are generally well-established companies with a predictable cash flow. Defaulting on their rent is highly unlikely, even with periodic rent increases.
• Anchor Tenants: Shopping malls, outlet centers, and grocery centers are ideal places for anchor tenants. These are the main stores that make up the most revenue and attract customers to the area. Hence, other stores will want to be in this prime location too - making vacancies unlikely.
• Necessity: Whether offering needed services, discount goods, food, or even specialized products, there is always going to be a need for brick-and-mortar stores. Even as online shopping becomes more and more prevalent, people want to shop in person and will continue to do so.

Risks of Retail REITs

• Interest Rates: Interest rates are always going to be a risk. When interest rates are high, it can badly influence REIT stock prices. Investing in income-focused stocks of course holds risk. That’s why you have to be smart about how and when you invest.
• The Economy: While most retail REITs are fairly recession-resistant, there are some categories that are recession-prone. Many small businesses can be recession-prone if they offer expensive goods that bigger chains can offer cheaper. If a store’s services are more of a luxury than a necessity they could be in trouble too. When the economy is bad, people look for the best prices and the most essential goods and services. Some retail stores just can’t compete.

Overall, retail REITs can offer a huge possibility of long-term and consistently high returns. There are so many aspects of retail real estate to explore and keep in mind. Make sure you understand your risk - and how handsomely you can be rewarded.

Best Retail REITs

Simon Property Group (NYSE: SPG)

Simon Property Group is a leading real estate investment trust that specializes in owning, developing, and managing premier shopping, dining, entertainment, and mixed-use destinations. With a diverse portfolio of properties across North America, Europe, and Asia, Simon Property Group is known for its innovative approach to creating dynamic retail environments that drive foot traffic and engage consumers.

Realty Income (NYSE: O)

Realty Income (NYSE: O) is a real estate investment trust that has established itself as a leading player in the commercial real estate sector. As a REIT, Realty Income owns, operates, and finances a diverse portfolio of properties, primarily focusing on retail and commercial spaces. What sets Realty Income apart from its competitors is its unique business model of being a "Net Lease" REIT.

This means that the tenants leasing properties from Realty Income are responsible for paying most, if not all, of the property expenses such as taxes, maintenance, and insurance. This structure provides a steady and predictable income stream for Realty Income, as the company enjoys long-term lease agreements with high-quality tenants.

NNN REIT (NYSE: NNN)

NNN REIT is a real estate investment trust that specializes in triple-net lease properties. Triple-net leases require tenants to cover property taxes, insurance, and maintenance costs in addition to rent, providing stable and predictable income for the REIT. NNN REIT's diversified portfolio includes retail, office, and industrial properties across the United States, allowing investors to benefit from a variety of sectors within the commercial real estate market.

Industry Overview

Quarterly Performance Data

All Retail REITs

REIT Alternatives

REITs provide a low-cost and simple way to invest in real estate. However, they aren't the only option available to generate passive income through real estate with a low minimum investment.

Real estate crowdfunding offers investors the ability to decide which properties they want to invest in while still enjoying passive income at a fraction of the cost of traditional methods of real estate investing. Here are some of our favorite real estate crowdfunding platforms:

Frequently Asked Questions