KBWY - Shopping Center REITs: No Longer A Bargain

• A post-vaccine revival? Shopping Center REITs have been the best-performing property sector over the last month, surging more than 40% following the release of positive coronavirus vaccine trial results.
• After plunging more than 50% early in the pandemic, shopping center REITs have reported stabilizing fundamentals over the last two quarters with rent collection improving to nearly 90%.
• Strong leasing activity was the highlight of third-quarter earnings reports, confirming that the long-term outlook for open-air strip centers remains far more promising than their enclosed regional mall peers.
• Shopping Center REITs are not out of the woods yet. Struggling service-oriented small-shop tenants may not survive a "third wave" of economic lockdowns that have cascaded across the country.
• Following the frenetic post-vaccine rebound, Shopping Center REITs are no longer the "essential bargain" that they were last quarter. We've turned cautious on the sector, but still see value in select grocery-anchored REITs.

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