REITs and the related ETFs haven’t done much following the Federal Reserve’s interest rate cut, indicating that was largely priced into the rate-sensitive sector. More rate cuts could be on the way. However, investors may want to examine other potential catalysts for real estate equities.
On that note, the ALPS Active REIT ETF (REIT) is an ETF to watch for multiple reasons, including a nearly 15% weight to retail REITs. Yes, retail REITs, a corner of the real estate sector long seen as vulnerable to the rise of online retail, could spark the ALPS ETF. Additionally, fundamental data confirm a brighter-than-expected outlook for retail REITs.
“Data from Nareit’s quarterly REIT Industry Tracker show that retail property operations have remained strong,” noted Nareit. “As of the second quarter of 2025, average year-over-year funds from operations (FFO), net operating income (NOI), and same-store net operating income (SS NOI) increased by 5.1%, 5.1%, and 4.0%, respectively. The average retail occupancy rate was 96.6%, the highest rate among the four traditional property types.”
More Good News for REIT’s Retail Exposure
Additionally, when it comes to dividends, REIT sports a trailing 12-month dividend yield of 3.12%. That’s tame, and therefore implies room for growth.
Also, with interest rates trending lower, real estate companies could have wiggle room to boost payouts. However, what judicious investors want to see is strong balance sheets supporting higher dividends. Retail REITs, including some held by the ALPS ETF, answer that call.
“Retail REITs have also maintained thoughtful and disciplined balance sheets. As of the second quarter of 2025, Nareit’s REIT Industry Tracker showed that the retail sector’s average leverage ratio was 34.6%. On average, fixed rate and unsecured debt accounted for 94.1% and 82.0% of total debt, respectively. Retail’s weighted average term to maturity on total debt was 6.6 years; its weighted average cost was 4.1%,” added Nareit.
Mall REITs could be additional sources of strength in the retail real estate space.
“Green Street assigns grades to U.S. regional and super-regional malls,” concluded Nareit. “The best malls are assigned grades of A- or better; approximately 25% of malls are A-rated. The outlook for these malls tends to be bright; they also are attractively priced. Over half of U.S. malls are assigned grades of B- or worse. These malls typically face dim prospects. Publicly-traded retail REITs tend to focus on better-quality malls.”
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