Direct Answer
Retail REITs own shopping malls, open-air lifestyle centers, and grocery-anchored strip malls. Simon Property Group (malls and premium outlets) and Regency Centers (grocery-anchored open-air) are the US leaders. Malls faced the most severe disruption from e-commerce (department store anchor closures) but high-quality Class A mall portfolios have recovered strongly through 2022-2024 as experiential and food tenants replaced soft goods retailers. Grocery-anchored centers have proven the most resilient retail property format.
Mall Evolution: The Department Store Problem and Experiential Reinvention
US regional malls were built around "anchor" department stores (Macy's, JCPenney, Sears, Bloomingdale's) that drove traffic and justified smaller "inline" tenant rents. The secular decline of department stores (Sears bankruptcy 2018, JCPenney bankruptcy 2020, dozens of Macy's closures annually) left thousands of square feet of anchor space vacant in malls across the US. Unlike office or apartment vacancies, mall anchor vacancies are structural: the department store format itself is in secular decline, and no obvious equivalent tenant exists at comparable scale.
Successful mall reinvention is happening at Class A malls with high-quality locations in affluent markets: anchor boxes are being converted to entertainment (Bowlero, Top Golf, Dave & Buster's), fitness (Life Time Fitness, F45), mixed-use (adding residential apartments, hotels, medical offices above the retail base), grocery stores (Whole Foods, Trader Joe's), and specialty experiential retail (Apple stores, Peloton showrooms). The result is a denser, more diversified tenant mix with higher traffic frequency than a mall anchored entirely by department stores.
Class B and C malls without the density, demographics, or capital to reinvent are in more serious trouble: without anchor replacement, their inline tenant sales suffer, leases don't renew, and the spiral of vacancies and rent declines accelerates. Hundreds of Class B/C malls have been sold below debt face value, converted to mixed-use, or demolished. This "mall death" narrative, while accurate for the lower quality segment, has obscured the performance strength of premium Class A malls.
Open-Air Centers: Grocery-Anchored and Lifestyle Centers
Open-air retail centers (strip malls and lifestyle centers) have proven significantly more resilient than enclosed malls through the e-commerce disruption because: grocery anchors (non-e-commerce-competitive essential retail) drive traffic; service tenants (nail salons, dental offices, quick-service restaurants, urgent care clinics) provide non-online-displaceable income; and the format is convenient for short, functional shopping trips rather than the destination experience a mall requires.
Grocery-anchored centers earn premium valuations among retail REITs: the grocery anchor (Kroger, Publix, Whole Foods, Aldi) generates weekly customer visits that drive foot traffic for inline tenants (coffee shops, dry cleaners, restaurants). Grocery's e-commerce displacement has been slower than general retail (food is harder to ship profitably at the last mile for unplanned daily purchases). Regency Centers, Kimco Realty, and Inland Real Estate are the leaders in grocery-anchored open-air retail.
The "last mile logistics" opportunity has emerged for retail real estate: high-density urban areas where same-day delivery is demanded but warehouse space is scarce create opportunities for retail property owners to repurpose underperforming retail boxes as urban fulfillment centers (small-format warehouses serving e-commerce last-mile delivery). Amazon, Walmart, Target, and grocery operators have explored converting dark retail spaces into fulfillment nodes -- a genuine option value for retail REIT owners with high-cost-market locations.
Premium Outlets: Simon and the International Tourism Model
Premium outlet centers (Simon's Premium Outlets, Tanger Factory Outlet) offer brand-name merchandise at 25-65% discounts in destination shopping environments. Premium outlets are particularly resilient because: they offer genuine value (deep discounts on authentic brand merchandise), not just price parity with department stores; they are destination experiences driving tourism and day-trip traffic; they have limited direct online competition because the in-store treasure-hunt browsing experience generates sales that don't translate well to e-commerce browsing.
Simon Property Group's Premium Outlets portfolio (Woodbury Common in New York, Las Vegas Premium Outlets, Sawgrass Mills in Florida) attracts significant international tourist traffic: Asian tourists specifically seek out US outlet centers as destinations for brand-name luxury goods at prices below their home markets even after purchase and customs duties. This international tourism component makes Simon's sales metrics partially counter-cyclical to domestic consumer spending.
Simon's international expansion (Premium Outlets in Japan, Korea, Malaysia, Canada) and its investment in challenged retailers (J. Crew, Brooks Brothers, Lucky Brand -- acquired from bankruptcy to maintain occupancy) demonstrate its proactive approach to managing tenant mix and mall ecosystem health. Owning a challenged retailer and keeping it operational in your mall is preferable to losing the tenant and creating vacancy.
Major Players: Simon Property Group, Regency Centers, Kite Realty
Simon Property Group (SPG) is the largest retail REIT in the US by market cap, owning 190+ regional malls, Premium Outlets, and The Mills (power centers). Its scale and capital give it the ability to invest in mall reinvention that smaller REIT owners cannot match; its premium outlet portfolio provides the most defensive segment of mall real estate. Simon's balance sheet strength allowed it to maintain its dividend through the 2020 pandemic (after a temporary cut) while weaker mall REITs cut dividends permanently.
Regency Centers (REG) is the largest US REIT focused on grocery-anchored, open-air shopping centers. Its portfolio is concentrated in affluent suburban neighborhoods with strong demographic support; Regency specifically targets centers where the grocery anchor is market-share dominant (Publix in the Southeast, Kroger in the Midwest) and demographics support premium inline tenant rents. Its conservative balance sheet (low leverage for a REIT) allows flexibility to invest in redevelopment and acquisitions through cycles.
Kite Realty Group Trust (KRG) is a growing open-air shopping center REIT that merged with Inland Real Estate Income Trust in 2021, substantially expanding its portfolio. Its strategy is grocery-anchored and community/lifestyle centers in Sun Belt markets benefiting from population in-migration (Atlanta, Dallas, Phoenix, Nashville).
Investment Considerations: Format Bifurcation and Retail Spend Recovery
Retail REIT investment requires careful format-level analysis: Class A mall REITs (Simon, Brookfield) have recovered strongly and generate strong FFO growth; Class B/C mall REITs face structural impairment; grocery-anchored REITs have been the most consistent performers; and lifestyle/strip centers reflect local market dynamics. Treating "retail REITs" as a monolithic category misses the fundamental bifurcation between formats and quality tiers.
Retailer health is the primary fundamental risk: retail REIT cash flow depends on tenants paying rent, which requires tenants generating profitable sales. Major retail bankruptcies (specialty apparel, department stores) create immediate cash flow disruption (bankruptcy allows lease rejection, terminating rent obligations) and require replacement tenant investment (TI allowances). REITs with tenant concentration in vulnerable retail categories (soft goods, mid-market department stores) carry more credit risk than those with service, food, and necessity-focused tenant mixes.
Comparable sales per square foot (and comparable net operating income growth) are the key operational metrics: rising sales/sq ft means tenants are generating the revenue to support lease renewals at higher rents; declining sales/sq ft means tenants will struggle to renew or reduce rent on renewal. Simon's premium mall portfolio has reported consistently strong sales/sq ft ($700+ at premier malls), supporting the quality narrative for its assets.
FAQ
Are malls dying?
Lower-quality malls are dying; premium malls are thriving. The approximately 1,200 US enclosed malls are sharply bifurcated: 300-400 Class A and Class A+ malls in wealthy demographics maintain 90-95% occupancy, high sales per square foot, and rising rents as they attract experiential, food, and service tenants to replace department stores. Below these are 500-600 Class B malls at moderate risk, 200-300 Class C malls at serious risk of closure or conversion, and roughly 100 truly dead malls already repurposed, vacant, or demolished. When investors talk about "mall REITs," they often conflate these categories. Simon Property Group (the largest mall REIT) owns predominantly Class A assets that are performing well; smaller, lower-quality mall owners face genuine existential challenges.
Why are grocery-anchored centers more resilient than regular strip malls?
Grocery anchors drive weekly customer traffic regardless of economic conditions or e-commerce competition: people need food, and grocery delivery has higher prices and is less convenient than an in-store trip for most household grocery needs. Weekly grocery shoppers pass by the inline tenants (coffee shop, nail salon, dry cleaner, urgent care) on every trip, generating impulse visits that don't require a special destination decision. This high-frequency, non-discretionary traffic base insulates grocery-anchored centers from economic cycles and e-commerce displacement better than centers anchored by clothing or home goods stores, where e-commerce has effectively eliminated the need for physical trips.
What are "comparable sales" and why do retail REITs report them?
Comparable sales (or comp sales, or same-store sales) for retail REITs refers to the total retail sales generated by tenants in properties that have been in the REIT's portfolio for more than one year (excluding the impact of newly opened or acquired properties). High comparable sales mean tenants are generating strong revenue growth, supporting their ability to pay and increase rents at lease renewal. Low or negative comparable sales warn of tenant stress and future occupancy/rent risk. Simon Property Group reports tenant sales per square foot ($700+ for its premier portfolio) and comparable NOI growth (the REIT's own same-property net operating income growth) as the primary operating metrics. Comparable sales track the health of the underlying retail business that generates REIT cash flow.
What makes Simon Property Group the dominant US mall REIT?
Simon Property Group's dominance reflects four advantages. First, portfolio quality: it owns the best-located, highest-traffic malls in the US (Woodbury Common, Copley Place, Disney Springs, Las Vegas Premium Outlets), which attract the most desirable tenants on the most favorable terms. Second, scale: operating 190+ properties allows Simon to negotiate as a preferred landlord with large retailers who want representation across multiple high-traffic markets. Third, balance sheet: Simon's investment-grade balance sheet (one of few retail REITs to maintain investment grade through 2020) allows it to fund tenant improvements, acquisitions, and development that leveraged competitors cannot. Fourth, operational expertise: Simon actively manages its properties as destinations (sponsorships, events, co-working spaces, mixed-use additions) rather than passive rent collectors.