By now it’s pretty clear to most investors that brick-and-mortar retail didn’t have the happiest of holidays and that’s got to have retail REITs more than a little nervous.
Sure, online retailers had a bonanza led by Amazon.com, Inc. (NASDAQ:AMZN) who had its best holiday ever, and there were pockets of strength with some omnichannel retailers actually executing on their business plans during the most important two months on the shopping calendar.
However, there were some real stinkers reporting sales for December, including several department stores.
“Net results are mixed with a few winners and a few losers,” said Stifel Nicolaus & Co retail analyst Richard Jaffe in a recent conference call. “Longer term into 2017, there are probably four to six bankruptcies that will be announced.”
If Jaffe’s prediction comes to fruition there’s going to be a lot of retail space going empty in a hurry and that’s definitely going to weigh on retail REIT revenues in 2017 and beyond.
So, how do investors play this? Do they simply stay away from retail REITs completely or cherry pick the one or two that are positioned to weather the retail storm?
It’s a fair question; one that I’ll answer below.