Which of These 3 Retail REITs Should You Buy, Sell, or Hold?

The FTSE Nareit All Equity REITs Index increased by 2.0%, and the FTSE EPRA Nareit Global Extended Index increased by 3.4% in July. This was the first time REITs experienced two consecutive months of gains since October–November 2022.

Given the solid growth trajectory, while investors could consider buying quality retail REITs Saul Centers, Inc. (BFS – Get Rating) and Alexander’s, Inc. (ALX – Get Rating), I think Realty Income Corporation (O – Get Rating) might be best kept on hold for the reasons discussed.

The U.S. Federal Reserve is projected to increase rates by 25 basis points in September, and market expectations imply potential rate cuts starting in 2024, according to CME Group’s FedWatch tool. Moreover, Economist Jim O’Neill predicts that major economies’ central banks will need to maintain interest rates around 5% for a more extended period than anticipated, despite decreasing inflation.

Amid stock market uncertainties, Real Estate Investment Trusts (REITs) stands out as a promising choice. Their unique ability to generate stable and increasing rental incomes positions them favorably against other asset classes. Moreover, REITs offer diversification to counter market fluctuations and an inflation hedge through real estate appreciation.

In addition, rapid urbanization and heightened occupancy rates in cities are boosting the retail REITs market. Moreover, the global demand for warehousing and storage facilities is rising across various industries, such as electronics, automotive, chemicals, food and beverage, pharmaceuticals, and FMCG products.

The global REIT market is anticipated to expand at a CAGR of 2.8% to $333.01 billion by 2027, with North America contributing 63% to the global market growth, as per Technavio.

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