US real estate: what about Mall REITs?

7th August 2017

Vitangelo Pagliarulo, Junior Financial Analyst

Since several months, we notice a strong underperformance of Mall REITs in the US. Indeed, since the beginning of the year, the segment has been underperforming the real estate market by 9%. Over one year, the difference is even more impressive as it is lagging by -18%. This is mainly due to the difficulties experienced by “brick and mortar” retailers, which are the main tenants of mall operators and which have been continuously losing market share over online retailers. The situation doesn’t seem to improve as 6’000 shops are expected to close in 2017; the highest number over the last 20 years.

Today, online retail, which has been experiencing an annual growth of around 15% since 7 years, represents only 8% of the total retail industry in the US. This growth doesn’t seem to slowdown and announces rather a true structural change to which mall operators need to adapt quickly.