Retail REITs

Retail REITs acquire and develop properties in the retail space, including outlet centers, shopping malls, power centers, strip malls and freestanding retail properties. Like office REITs, many retail REITs specialize in a particular type of client, property or location.

The advantages of retail REITs are in many ways similar to those of office REITs — when owning a large property such as a shopping mall, there is little reliance on the stability of a particular company due to the REIT’s diversification across multiple clients. That said, in many cases, larger clients are still very important to these retail spaces. Large box stores (known in the REIT space as an “anchor tenant”) can provide a stable cash flow whilst attracting business, and with it, several smaller stores.

Among freestanding stores, retail REITs use triple net leases and require their tenants to cover building insurance, real estate taxes and building maintenance in addition to their base rental rate. This makes freestanding store tenants highly stable and able to provide large, uninterrupted cash flow.

There are currently 20 retail REITs trading on major US stock exchanges. The following three REITs each focus on a different type of retail property: Simon Property Group (NYSE: SPG) features malls, Realty Income Corporation (NYSE: O) owns single-tenant retail properties and Acadia Realty Trust (NYSE: AKR) invests in shopping centers.

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