SRET - Shopping Center REITs: Too Far Too Fast

• Too far, too fast? Shopping Center REITs have continued their post-vaccine resurgence into early 2021, surging another 30% this year and pushing stock prices back near pre-pandemic levels.
• Shopping center REITs fared far better than their enclosed mall peers but still reported an average FFO/share decline of nearly 20% in 2020 while same-store NOI dipped over 10%.
• Strong leasing activity in the back-half of 2020 confirmed that the long-term outlook for open-air strip centers remains far more promising than their enclosed regional mall peers.
• It's too soon to declare victory. WWII-levels of fiscal stimulus powered retail sales to record highs in 2020, but while the "big boxes" are thriving, service-oriented "small-shop" retailers were annihilated by lockdowns.
• While rent collection has improved considerably, it remains a few percentage points below "normal" levels at roughly 95%. Valuations currently appear extended as REITs that provided guidance see only modest growth in 2021.

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