Coronavirus deals a blow to retail REITs

Brick-and-mortar retail could suffer further if shoppers stay indoors

TRD WEEKEND EDITION /
Mar.March 07, 2020 12:00 PM
The now-global economic threat of the COVID-19 coronavirus is hitting retail-heavy REITs as investors worry about brick-and-mortar shopping. (Credit: Getty Images)
The now-global economic threat of the COVID-19 coronavirus is hitting retail-heavy REITs as investors worry about brick-and-mortar shopping. (Credit: Getty Images)

Add the COVID-19 coronavirus to the list of obstacles facing brick-and-mortar retail.

Authorities have confirmed cases of the virus in more than 80 countries and territories worldwide. Concern over the virus — or measures taken to stop the spread of the virus — could keep shoppers at home, according to the Wall Street Journal.

The impact on retail is already showing in the performance of real estate investment trusts. The FTSE Nariet All REITs Index, which tracks American REITs, lost 12.3 percent last week. When the virus began affecting the global economy, some REIT shareholders began selling off shares of trusts that held some of their value.

Many left the relatively safe REIT space for low-risk government bonds. Some could return to higher-yield REITs now that the Federal Reserve has cut interest rates.

Mutual funds with REIT investments could suffer too, especially those that offer daily withdrawals to clients. Those clients could decide to pull their money out of those funds.
“Ultimately, there will be a lot of people relying on income from property funds, so it will be a big decision if they decide to cut and run and not one they’ll take lightly,” said Russ Mould, investment director at AJ Bell, according to the Journal.

In times of economic turmoil, including in the immediate aftermath of Great Britain’s 2016 vote to leave the European Union, funds have frozen investments to hold off a run.
Retail-heavy REITs aren’t the only ones taking a hit. Hotel REITs were hit first as COVID-19 emerged as a global economic threat. [WSJ] — Dennis Lynch


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