Shopping Center REITs: Undervalued Despite Growth Ramp

2025-09-04 00:13:06 ET

For many investors in the past decade, e-commerce growth relegated brick and mortar retail to an uninvestable world on a gradual death march. Some viewed the “COVID” e-commerce surge of 2020-21 as the “nail in the coffin”; instead, it proved the essential nature of physical locations in an omnichannel world. Indeed, Target (TGT) touts ~40% savings for in store fulfillment versus dedicated distribution centers and, unsurprisingly, fulfilled ~98% of merchandise sales (including online sales) through a physical store in 2024. This sea change is common with most big box retailers today, and it has meaningfully increased the demand for well-located space. As a result of the higher demand combined with minimal new supply, retail vacancy hovers around historic lows . We believe that vacancy can decline further to new record lows, leading to higher rents and underappreciated earnings growth for Shopping Center REITs....

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