Retail REITs are real estate investment trusts that invest primarily in properties used for retail activities, including shopping centres, malls, retail strips, shopping arcades, and other similar premises.
Properties under retail REITs are usually located in city centres, but a growing number of REITs are also branching out to serve suburban neighbourhoods.
Among the different categories of REITs, performance of retail REITs are probably be the easiest to gauge given the highly examinable nature of its properties, and visibility of foot traffic into these premises.
However, beyond cursory glances at the level of human traffic, other signs that investors usually look out for include the presence of a reputable anchor tenant within the property.
Retail REITs often have more favourable lease agreements with their tenants as compared to other forms of REITs, and these include triple net leases, annual rent escalations, and agreements to retain portions of profits from respective tenants when sales reach target levels.
However, in comparison with other types of REITs, retail REITs relatively do not enjoy the luxury of long term leases with their tenants.