The Intelligent REIT Investor Guide

CHAPTER 5Retail REITs

“We have a long list of retailers that have struggled… . And 80% to 90% of that list have been over‐levered so they couldn't turn left or right.”

—David Simon, CEO of Simon Property Group

For the entire first half of the twentieth century, shoppers bought everything locally at small stores on Main Street or in downtown shopping areas. It wasn't until 1956 that retail‐related real estate possibilities changed enormously. That was when the first enclosed shopping mall was built in Edina, Minnesota, an immigrant‐inspired, Europe‐reminiscent model that quickly became an American institution.

Since Southdale Center's debut, the number of shopping alternatives and retail venues has exploded in ways previous eras never could have imagined. Today's consumers can shop at enclosed malls; neighborhood shopping centers; big‐box megastores such as Walmart, Costco, Target, or Ross; and sprawled‐out outlet centers.

It's quite the variety, to say the least. And, for the first two decades of the twenty‐first century, most of these places – even newer concepts such as “lifestyle” centers that look like something between an outlet center and a strip mall – were taken for granted. Even while shoppers were slowly but surely turning toward online options, many did so under the assumption that physical retail would remain as‐is.

But the game changed drastically thanks to the Covid‐19 pandemic and subsequent shutdowns. As CNBC reported on August 30, 2020, retailers were “reporting ...