Top 3 Retail REITs Poised Well to Gain From Tight Supply and Stability

The Zacks REIT and Equity Trust - Retail industry benefits from everyday retail, with necessity-based, value-focused and routine discretionary tenants driving predictable demand. Limited new supply, cautious development, and repositioned assets support occupancy, rent stability and cash flow. Well-located stores gain value as physical locations integrate fulfillment, returns and engagement. Retail REITs such as Simon Property Group SPG, Regency Centers REG and Urban Edge Properties UE are well-positioned to capitalize on these trends.

However, risks include uneven consumer behavior, inflation and higher costs pressuring discretionary spending. Slower leasing, tenant credit risk and broader economic uncertainty could delay expansion, keeping near-term growth measured.

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?

Everyday Retail Is Driving More Predictable Demand: Everyday consumer needs are becoming a key driver of stability for retail REITs. Space anchored by food, value-focused retail, essential services and routine discretionary spending has held up better than trend-led concepts. These tenants attract regular visits, which support sales performance and improve rent reliability. As a result, vacant space is being absorbed more quickly, often by necessity-based or experience-oriented uses that align with current shopping habits. Physical stores are also taking on added importance as part of fulfillment, returns and customer engagement strategies, increasing the value of well-located assets. For retail REITs, this shift is translating into more consistent leasing activity, reduced tenant churn and steadier cash flow visibility.

Tight Supply Is Supporting Fundamentals: A prolonged period of limited new supply continues to underpin retail REIT fundamentals. Development has stayed subdued as tighter capital conditions and greater caution from developers curb new projects. With fewer options coming to market, retailers seeking to grow are often forced to utilize existing space, shifting negotiating leverage toward current property owners. This dynamic has encouraged landlords to redevelop and reposition older assets, helping maintain occupancy levels and reducing the risk of oversupply. From an investor perspective, supply discipline lowers downside risk and adds stability to returns, particularly during periods of economic uncertainty. Retail REITs are also taking advantage of this backdrop to refine tenant mixes, prioritizing concepts aligned with durable consumer needs over short-term expansion. While growth may be measured, this environment supports healthier portfolios and reinforces the industry’s defensive, income-focused profile.

Consumer Behavior Remains the Key Uncertainty: Consumer spending remains the most important source of uncertainty for retail REITs. Although overall demand for retail space has been relatively stable, spending behavior differs across income groups and retail segments. Economic softness, higher living costs and inflation tied to tariffs are prompting many households to be more cautious. Higher-income consumers continue to spend, while middle-income shoppers are pulling back, creating an uneven demand backdrop. This divergence places pressure on discretionary retailers and results in wider performance differences across portfolios. Retail REITs with heavier exposure to optional spending categories are more likely to see volatility in leasing activity and tenant credit quality. Broader economic uncertainty may also cause retailers to delay expansion plans, even when financial positions are sound. For investors, tenant quality, portfolio mix and management discipline remain critical, with essential-focused portfolios better positioned.

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 #92, which places it in the top 38% of 244 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 July 2025, the industry’s FFO per share estimates for 2026 have moved nearly 1.1% 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 2.3% during this period compared to the S&P 500’s rise of 17.6% and the broader Finance sector’s growth of 12.9%.

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 14.91X compared with the S&P 500’s forward 12-month price-to-earnings (P/E) of 23.20X. The industry is also trading below the Finance sector’s forward 12-month P/E of 17.12X. 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 15.15X.

3 Retail REIT Stocks to Buy

Simon Property Group: Headquartered in Indianapolis, IN, this is the largest retail REIT that owns, develops and manages premier malls, premium outlets, and mixed-use destinations across North America and internationally. As of Sept. 30, 2025, Simon Property owned or held interests in 194 income-producing properties in the United States and had ownership of 38 Premium Outlets and Designer Outlet properties, mainly in Asia, Europe and Canada.

Simon’s investment case is anchored in resilient occupancy, rising rents, and solid balance sheet liquidity exceeding $9 billion, which supports strategic growth and redevelopment. The company is steadily increasing its dividend, while its tenant mix, including luxury and experiential brands, enhances pricing power and sustainability in a competitive retail environment. 

Analysts seem bullish on this stock, with the Zacks Consensus Estimate for its 2025 and 2026 FFO per share being revised upward to $12.68 and $ 13.02, respectively, over the past two months. Simon Property currently carries a Zacks Rank #2 (Buy). The stock has risen 6.3% in the past three months.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  

Price and Consensus: SPG

Regency Centers Corporation: Headquartered in Jacksonville, FL, this retail REIT is focused on grocery-anchored, open-air shopping centers located in affluent, supply-constrained U.S. markets. As of late 2025, the company owned interests in more than 480 properties, concentrated in high-income suburban trade areas with strong demographic fundamentals. 

Regency’s investment appeal is driven by durable cash flows and embedded growth. More than 85% of its portfolio is grocery-anchored, supporting stability across cycles. The company maintains an A- rated balance sheet, ample liquidity and a visible redevelopment pipeline that enhances long-term NOI. Strong rent spreads, disciplined capital allocation, and a defensive tenant mix position REG for sustainable FFO growth and reliable shareholder returns.

Regency Centers currently carries a Zacks Rank #2. Over the past month, the Zacks Consensus Estimate for 2025 and 2026 FFO per share has witnessed upward revisions to $4.63 and $4.81, calling for a 7.67% and 3.94% increase year over year, respectively. The stock has appreciated 2.8% in the past three months.

Price and Consensus: REG

 
Urban Edge Properties: This retail REIT, headquartered in New York, NY, is focused on owning, operating and redeveloping retail real estate in dense, supply-constrained, high-income U.S. markets, primarily across the Northeast corridor from Washington, D.C. to Boston. Its portfolio comprises more than 70 retail properties totaling more than 17 million square feet, with a strong tilt toward grocery-anchored and necessity-based centers that benefit from resilient consumer traffic and limited new supply.

Urban Edge offers a compelling investment case driven by improving fundamentals and balance sheet strength. Grocery tenants represent roughly 80% of portfolio value, enhancing income stability. The balance sheet remains solid, with only about 8% of debt maturing through 2026. Management targets 4-5% annual FFO growth, backed by a strong lease pipeline, redevelopment initiatives and disciplined capital recycling.

UE currently has a Zacks Rank #2. While the stock has declined 2.9% over the past three months, it currently offers a good entry point. The Zacks Consensus Estimate for its 2025 FFO per share has been raised 1.4% over the past month to $1.44, indicating a 6.67% year-over-year increase. The consensus mark for 2026 FFO per share also calls for a 3.47% increase year over year to $1.49.

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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Simon Property Group, Inc. (SPG): Free Stock Analysis Report
 
Regency Centers Corporation (REG): 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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