Bet on These 3 Retail REITs as the Sector Shows Renewed Strength

The Zacks REIT and Equity Trust - Retail industry is showing renewed resilience as landlords adapt and reposition assets for long-term stability. Strategic re-tenanting, a focus on necessity-based and experience-driven retailers, and disciplined expansion are strengthening occupancy and cash flows. Limited new supply and prudent development activity are helping preserve rent levels and investor confidence, while redevelopment of older assets adds further value. Companies such as Agree Realty Corporation ADC, Federal Realty Investment Trust FRT and Urban Edge Properties UE are well-placed to benefit from these favorable dynamics. However, inflation, shifting consumer behavior and slower economic growth remain key risks that could moderate leasing momentum and weigh on near-term growth.

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?

Resilience and Repositioning Are Paying Off: Retail REITs have demonstrated greater strength and adaptability than anticipated. The earlier surge of store closures compelled landlords to rethink the purpose of retail space, and those adjustments are now paying off. Vacant properties are being swiftly re-leased, often to necessity-focused or experience-oriented tenants. Retailers are also approaching expansion more carefully, targeting locations with strong demographics and consistent foot traffic instead of pursuing aggressive growth. This disciplined, brand-focused strategy is fostering a more balanced tenant mix, lowering turnover risks and keeping occupancy stable. The industry has shifted away from crisis headlines toward steady progress and sustainable leasing patterns. For investors, this transformation means more predictable returns, stronger property performance and a market that rewards strategic positioning over rapid expansion.

Limited Supply Keeps Fundamentals Intact: One of the strongest stabilizers for retail REITs now is the lack of new supply. Construction activity has remained muted for years, largely due to tighter financing conditions and a more disciplined approach from developers. With few projects breaking ground, existing assets face minimal competitive pressure, allowing occupancy and rents to hold firm. This constrained pipeline helps balance the uneven demand patterns seen in more discretionary categories. Well-positioned centers are benefiting most, as limited availability continues to sustain investor interest. At the same time, landlords are finding creative ways to add value, redeveloping older or underused properties into mixed-use spaces that attract steady traffic and long-term tenants. Together, these factors create a more controlled, resilient environment for retail real estate performance.

Consumers Remain the Wildcard: Despite the encouraging fundamentals, the outlook for retail REITs ultimately depends on consumer behavior. Economic softness, rising costs, and tariff-related inflation are making households more selective in their spending. Wealthier consumers continue to support high-end demand, while middle-income shoppers are cutting back, leading to an uneven spending landscape. This polarization may temper leasing momentum and limit broad-based growth across retail formats. The sector’s stability remains intact for now, supported by tight supply and disciplined expansion, but its performance is closely linked to consumer confidence. Should the economic slowdown deepen or inflation persist, even the most resilient portfolios could feel the strain, with retailers likely to pause expansion plans and landlords facing greater pressure to retain tenants and sustain income levels.

Zacks Industry Rank Indicates Bright Prospects

The Zacks REIT and Equity Trust - Retail industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #55, which places it in the top 23% of 243 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates robust 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 top 50% of the Zacks-ranked industries is a result of the upward 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 gaining confidence in this group’s growth potential. Since March 2025, the industry’s FFO per share estimates for 2026 have moved nearly 1% north.

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 Underperforms Sector and S&P 500

The REIT and Equity Trust - Retail Industry has underperformed the broader Zacks Finance sector and the S&P 500 composite over the past year.

The industry has declined 5.6% during this period compared to the S&P 500’s rise of 22.3% and the broader Finance sector’s growth of 16.1%.

One-Year 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 14.98X compared with the S&P 500’s forward 12-month price-to-earnings (P/E) of 23.77X. The industry is also trading below the Finance sector’s forward 12-month P/E of 16.94X. 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 18.89X and as low as 12.21X, with a median of 15.22X.

3 Retail REIT Stocks to Consider

Agree Realty Corporation: Agree Realty is a publicly traded REIT that specializes in owning and managing a diversified portfolio of retail net-lease properties across all 50 states. As of Sept. 30, 2025, the company’s footprint includes approximately 2,603 properties totaling around 53.7 million square feet of gross leasable area.  

On the positive side, Agree Realty has raised its full-year 2025 investment guidance to a range of $1.50 billion-$1.65 billion, underscoring confidence in its capital deployment strategy. The company also boasts a strong balance sheet with total liquidity exceeding $1.9 billion and minimal debt maturities before 2028, which supports its ability to execute growth initiatives. Additionally, its portfolio is heavily weighted toward investment-grade tenants and e-commerce-resistant retail formats, which is expected to provide stability in varied economic conditions. 

Agree Realty currently carries a Zacks Rank #2 (Buy). Over the past three months, the Zacks Consensus Estimate for the current-year FFO per share has witnessed a marginal upward revision to $4.30, indicating a 3.9% year-over-year increase. While the stock has declined 1.7% in the past three months, it currently offers a good entry point.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price and Consensus: ADC

Federal Realty Investment Trust: Federal Realty, based in North Bethesda, MD, is a well-established REIT specializing in acquiring, owning and managing high-quality retail-focused properties in dense, affluent markets. The company’s portfolio features open-air shopping centers, mixed-use developments and urban lifestyle assets that cater to strong consumer catchments. As part of its disciplined strategy, Federal Realty continues to evaluate promising acquisition opportunities and execute renovations and repositioning to enhance value and maintain steady occupancy.

Among the notable positives for Federal Realty is its recent acquisition of Annapolis Town Center, which advances the company’s key priorities by adding a vibrant open-air destination anchored by major national retailers. This strategic move underscores the firm’s ability to deploy capital thoughtfully into assets that align with its trade-area expertise. Equally important is the firm’s reported steady performance in its third quarter of 2025, which reflects strong execution and reinforces confidence in its growth and income potential.

FRT currently carries a Zacks Rank #2. Over the past month, the Zacks Consensus Estimate for 2025 FFO per share has witnessed upward revisions to $7.22, reflecting analysts’ bullish outlook. The stock has increased 2.5% over the past three months.

Price and Consensus: FRT

 

Urban Edge Properties: Headquartered in New York, Urban Edge Properties focuses on owning, managing, acquiring, developing and redeveloping retail properties within urban communities, particularly along the Washington, D.C. to Boston corridor. Its portfolio is strategically positioned in densely populated, supply-limited areas, providing consistent customer traffic and long-term stability for its assets. 

A significant share of Urban Edge’s portfolio is anchored by strong, necessity-based retailers, providing a reliable foundation for steady cash generation. Grocery tenants account for about 80% of the portfolio’s value, reinforcing income stability. The company maintains a sound balance sheet, with just a small portion, around 8%, of its debt maturing through 2026. Its strategy is centered on achieving sustainable FFO growth of 4-5% annually, supported by a strong lease pipeline (around 8% of NOI), and strategic redevelopment and capital recycling.

UE currently has a Zacks Rank #2. The Zacks Consensus Estimate for its 2025 FFO per share has been raised 1.4% over the past month to $1.42, indicating a 5.2% year-over-year increase. The stock has risen 3.6% in the past six months.

Price and Consensus: UE

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.

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Federal Realty Investment Trust (FRT): Free Stock Analysis Report
 
Agree Realty Corporation (ADC): Free Stock Analysis Report
 
Urban Edge Properties (UE): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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