Despite depressing employment numbers, people are shopping, and that is leading to a rebound in the retail sector. For real estate investment trusts that invest in shopping malls, that news, combined with the fact that there has been sparse new mall construction for the past few years, is good news indeed.
As vacancies decrease and rents increase, mall REITs are seeing their luck change as the doldrums of the past four years begin to recede. A recent study cited by Bloomberg notes that the just-finished second quarter was the best in years for shopping malls, as reduced construction since 2008 has limited retail space. In addition, older, less successful malls are being razed and replaced by mixed-use space, rationing available space even more.
Malls have been under strain, but are beginning to rebound
Shopping malls have been hit hard since the financial meltdown, and less upscale properties have suffered the most. With shoppers migrating to higher-end malls, many of these sites are being recycled into office space or apartments. Some experts opine that approximately 10% of the current mall space will be reutilized in this manner. Also, the declining fortunes of anchor-store giant Sears Holdings
CBL & Associates Properties
Though the B-malls have just started to pick up, high-end malls have seen increased foot traffic for some time. REITs Simon Property Group
It looks as if shopping malls are experiencing a renaissance. According to research from IBISWorld, the next five years will see even more improvements in the industry's outlook, and as low-end malls continue to be reutilized throughout the next decade, foot traffic will continue to increase at both A- and B-malls. Shop around, but it seems like mall REITs might be a smart investment choice.
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Fool contributor Amanda Alix owns no shares in the companies mentioned above.
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