Retail ghost towns - InvestingChannel

Retail ghost towns

Almost 200 department stores shuttered in the past year with another 800 expected to go bust in the next five.

That’s over half the remaining department stores inside malls in the U.S.

Things were bad for retail stores before the pandemic.

Covid only made it worse.

Some department stores fared better than others.

Amazingly, Best Buy (BBY), a key anchor store in many retail centers, managed to reinvent itself.

Others like Sears are whispers in history.

Try explaining to a teenager Dustin Hoffman’s fascination with K-Mart in Rainman and see what happens.

Why this matters

Retailers filing for bankruptcy isn’t anything new.

But their commercial space needs an occupant.

Real Estate Investment Trusts (REITs) like Tangiers (SKT) need to find tenants BADLY!

Shares of the company peaked in 2016 just above $40. They slid down to $20 by 2020, only to collapse down to $3.90 last March.

While they’ve recovered most of their losses, don’t expect it to hold up for very long.

What it means for you

REIT stocks typically pay hefty dividends. Right now, SKT is listed at just over 4%.

Don’t expect these to hold up in the future.

Many of these retail REITs will suffer from cash flow as interest rates rise combined with low tenant occupancy rates.

A better bet are residential REITs like Welltopwer Inc (WELL). We all know the shortages in housing. And with a 3.2% yield, this is a pretty decent company to own.

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