In a Retail Storm

In a Retail Storm, Strip Malls Provide Some Cover Wall Street Journal (08/15/17) Fung, Esther

Open-air shopping centers appear to be on the upswing in many U.S. markets. Shares of REITs that own and operate these properties are up nearly 7 percent since the end of the second quarter after skidding 19.6 percent in the first and second quarters of this year, according to an index that tracks such activity by the National Association of Real Estate Investment Trusts. The open-air mall category includes strip malls that don't have enclosed walkways linking stores; power centers, which include anchor stores and a few small tenants; and community centers, which are neighborhood shopping centers that offer convenience-oriented stores. Retail landlords have been battered in recent years as Web-based shopping grabs more market share and major retailers announce store closures. Strip centers are less vulnerable to the retail upheaval, reports Mizuho Securities, due to the fact that they have less exposure to apparel retailers and offer more affordable rents than mall owners.

Kimco Realty Corp. states that it already has accounted for retailers that are restructuring and remains confident about its portfolio, with well-located sites and affordable leases. Kimco CEO Conor Flynn said the growing number of retailers his REIT is doing business with will far outweigh exposure to some of its tenants that are closing stores. Mall landlords acknowlege they are working harder to woo tenants that are more in tune with the general public's tastes and are spending more time structuring leases that are accommodative to tenants' demands while stile being profitable.

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