The Zacks REIT and Equity Trust - Retail industry faces pressure from elevated borrowing costs, inflation, rising bond yields and construction expenses, limiting acquisitions, refinancing and development. Consumer caution may weaken discretionary retail demand, while selective tenant preferences could pressure older properties through slower leasing, weaker pricing power and higher redevelopment spending.

Still, limited new supply, resilient necessity-based tenants and demand for well-located retail assets support the outlook. Strong occupancy, healthy leasing activity, solid liquidity and disciplined growth strategies improve industry resilience, making Simon Property Group (SPG Quick QuoteSPG - Free Report) , Realty Income (O Quick QuoteO - Free Report) and Tanger (SKT Quick QuoteSKT - Free Report) solid stocks to consider.

Industry Description

The Zacks REIT and Equity Trust - Retail industry comprises REITs that own, develop, manage and lease various retail properties, including regional malls, outlet centers, grocery-anchored shopping venues and power centers with big-box retailers. Net lease REITs focus on freestanding properties, where tenants bear rent and most operating expenses. Retail REIT performance is significantly impacted by economic conditions, employment levels and consumer spending trends. Key drivers of demand include the geographic location of properties and the demographics of surrounding trade areas. While the industry faced significant challenges from declining foot traffic, store closures and retailer bankruptcies in the past, it is now experiencing a rebound, driven by renewed consumer interest in in-store shopping, signaling a positive shift in the retail landscape.

What's Shaping the Future of the REIT and Equity Trust - Retail Industry?

Higher Rates and Bond Yields Add Pressure on Retail REITs: Elevated borrowing costs are making capital allocation more difficult for REITs. Acquisitions, refinancing and development projects must generate stronger returns to justify investment under tighter financial conditions. If inflation remains sticky, the possibility of renewed rate hikes could further increase funding costs and limit expansion. Retail projects are particularly sensitive because they often require significant upfront spending. Higher construction costs add risk. Meanwhile, rising bond yields can make fixed-income investments more attractive, potentially reducing investor demand for retail REITs as income-generating assets.

Consumer Caution Could Ail Discretionary Retail: The main concern is that consumer spending may become less reliable as households face higher living costs and economic uncertainty. Retail REITs may face uneven leasing trends as consumers become more careful about non-essential spending. Retailers dependent on discretionary purchases could slow expansion, close weaker stores or seek more flexible lease terms if demand softens. This may create vacancy pressure for landlords with greater exposure to fashion, specialty and other optional-spending categories. By contrast, tenants focused on everyday needs are likely to remain relatively stable. As a result, portfolio performance could increasingly depend on tenant quality, financial strength and the ability of landlords to replace weaker retailers with more resilient businesses.

Selective Tenant Demand Likely to Challenge Older Properties: Retailers are becoming more selective about the properties they choose, creating a wider gap between high-quality and less competitive assets. Occupiers increasingly favor newer, well-located centers that provide strong traffic, convenient access and space suited to changing customer preferences. Older properties may require higher spending on renovations, redevelopment and tenant improvements to remain attractive. Demand is also expected to favor suburban and growing regions over some traditional downtown locations. Retail REITs with less adaptable portfolios are likely to face slower leasing activity, weaker pricing power and higher capital requirements to protect occupancy over time.

Limited New Supply Supports Existing Retail Assets: A restrained construction pipeline remains an important advantage for retail REITs. With fewer new retail properties entering the market, established properties face less competition for tenants and have a better chance of maintaining occupancy and rents. Well-located open-air and grocery-anchored centers are expected to benefit most, particularly where available space is already limited. Demand from grocery, discount, off-price, service, food and wellness tenants should also support leasing activity. This supply-demand balance gives owners of strong properties greater pricing leverage and provides some protection against a more uncertain consumer and economic environment.

Zacks Industry Rank Indicates Bleak Prospects

The Zacks REIT and Equity Trust - Retail industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #181, which places it in the bottom 27% of 247 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dim near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of the narrowed funds from operations (FFO) per share outlook for the constituent companies in aggregate. Looking at the aggregate FFO per share estimate revisions, it appears that analysts are losing confidence in this group’s growth potential. Since May end, the industry’s FFO per share estimates for 2026 have moved marginally south.

However, before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.

Industry Outperforms Sector, Lags S&P 500

The REIT and Equity Trust - Retail Industry has outperformed the broader Zacks Finance sector but lagged the S&P 500 composite so far in the year.

The industry has risen 9.7% during this period compared with the S&P 500’s gain of 13.1% and the broader Finance sector’s growth of 3.7%.

Year-To-Date Price Performance

Industry's Current Valuation

On the basis of the forward 12-month price-to-FFO, which is a commonly used multiple for valuing retail REITs, we see that the industry is currently trading at 15.16X compared with the S&P 500’s forward 12-month price-to-earnings (P/E) of 19.85X. The industry is trading below the Finance sector’s forward 12-month P/E of 16.03X. These are shown in the chart below.

Forward 12 Month Price-to-FFO (P/FFO) Ratio

Over the last five years, the industry has traded as high as 18.61X and as low as 12.21X, with a median of 15.15X.

3 Retail REIT Stocks to Consider

Simon Property Group: This is a premier global retail real estate REIT that owns, develops and manages high-quality shopping, dining, entertainment and mixed-use destinations. Its portfolio spans malls, Premium Outlets, The Mills and international properties, with interests in 254 properties totaling 206 million square feet across North America, Europe and Asia, providing substantial scale and diversified consumer exposure. 

SPG’s portfolio quality and leasing power support a compelling growth story. Mall and Premium Outlet occupancy stood at 96%, while retailer sales reached $838 per square foot and base minimum rent increased 6.3%. Strong tenant demand, a development pipeline exceeding $4 billion and approximately $9.3 billion of liquidity provide meaningful flexibility to reinvest, upgrade tenant mix and pursue accretive opportunities, reinforcing long-term cash flow and dividend growth for sustained shareholder value creation.

Simon Property Group currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for 2026 and 2027 FFO per share has witnessed upward revisions to $13.23 and $13.75, indicating a 3.93% and 3.95% increase year over year, respectively. The stock has appreciated 9% so far in the year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price and Consensus: SPG

Realty Income: This is a global net-lease REIT with retail at the core of its platform, accounting for 78.3% of annualized base rent. Its portfolio emphasizes necessity-based and service-oriented concepts, with roughly 91% of retail rent tied to businesses designed to remain resilient across economic cycles. Grocery, convenience stores, home improvement, dollar stores and quick-service restaurants provide broad defensive exposure. 

This retail-heavy model combines scale, diversification and dependable contractual cash flows. Realty Income owns 15,588 properties, maintains 98.8% portfolio occupancy and generates about $5.3 billion of annualized base rent. Its global sourcing reach, investment-grade balance sheet and disciplined acquisition platform strengthen its ability to expand. 

Realty Income currently carries a Zacks Rank #3. While the stock has declined 3.8% so far in the year, the Zacks Consensus Estimate for its 2026 and 2027 FFO per share has remained strong and suggests increases of 3.27% and 3.68% year over year, respectively.  

Price and Consensus: O

Tanger: This REIT is a leading owner and operator of outlet and open-air retail destinations, backed by 45 years of retail expertise. Its portfolio includes 38 outlet centers and four open-air lifestyle centers spanning nearly 17 million square feet across 22 U.S. states and Canada. More than 3,000 stores operated by over 800 brand-name companies give Tanger broad consumer reach and tenant diversification. 

Tanger’s high-quality portfolio, strong leasing platform and disciplined growth strategy support an attractive long-term outlook. Occupancy remained robust at 96.6% in June 2026, while average tenant sales reached $487 per square foot, and blended cash rent spreads were 10.5%. With $1.0 billion of liquidity, 4.7X net debt-to-Adjusted EBITDAre and continued acquisitions, Tanger has ample flexibility to enhance properties, capture retailer demand and compound shareholder value over coming years.

Tanger currently has a Zacks Rank #3. The Zacks Consensus Estimate for its 2026 FFO per share has been raised marginally over the past month to $2.50, indicating a 7.30% year-over-year increase. The consensus mark for 2027 FFO per share has also been revised upward and implies a 4.80% increase year over year. The stock has gained 4.7% so far in the year.

Price and Consensus: SKT



Note: Funds from operations (FFO) is a widely used metric to gauge the performance of REITs rather than net income as it indicates cash flow from their operations. FFO is obtained after adding depreciation and amortization to earnings and subtracting the gains on sales.