Mall REITs Anticipate Flight to Quality

The nation’s most productive shopping centers, such as the Mall at Short Hills in Short Hills, NJ, are poised to reap the benefits of retailer growth programs.

SAN FRANCISCO—Retailer tenant sentiment is down as of the first quarter, says Canaccord Genuity, yet that’s a boon for class A mall landlords. The 25-basis point drop in Cannacord’s Tenant Sentiment Index from Q3 2016 reflects “retailers’ increasing focus on mall quality over quantity and ongoing market share shifts within the retail landscape,” says San Francisco-based REIT analyst Paul Morgan. “In our view, mall REIT investment strategies have anticipated these trends, positioning their portfolios to consolidate market share as retailers’ investment programs.”

The firm’s proprietary TSI, which distills comments from public mall retailers, stands at 5.35 on a scale of 1 to 10 as of Q1. Beyond the topline number, the current TSI reflects a mix of growth vs. consolidation.