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Capital Ideas™ 
Investment insights from Capital Group

Categories
Real Estate
A real problem for real estate?
November 27, 2017

Shift to e-commerce has hurt retail REITs in U.S. more than elsewhere


 


Consumers are shopping more online, which has not only hurt retailers but also property owners, including retail real estate investment trusts (REITs). The industry has struggled broadly, but U.S.-based companies have been hit hardest. Over the last five years, the U.S. Retail REITs industry has lagged the MSCI USA Index by 85%. In contrast, similar companies outside of the U.S. have trailed the MSCI World ex US Index by only 27%. International retail REITs have been more resilient for a couple of reasons. International consumers don’t shop online as much as they do in the U.S. And European department stores don’t anchor shopping malls – meaning that the malls aren’t as reliant on successful department stores to maintain foot traffic. The industry remains pressured both in the U.S. and abroad, but ultimately the long-term outlook for any individual REIT depends on its portfolio of properties. Investors should consider a bottom-up approach to research, which may help uncover companies with better prospects trading at attractive values.


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