Real Estate ETFs Climb on Hopes of a Rebounding Retail Industry

Real estate sector-related exchange traded funds surged Wednesday, with Simon Property Group (NYSE: SPG) leading the charge, as the easing shutdown measures fuel hopes that consumers will return to malls and retail stores.

On Wednesday, the SPDR Dow Jones REIT ETF (RWR) gained 4.0%, Schwab US REIT ETF (NYSEArca: SCHH) increased 3.9% and Real Estate Select Sector SPDR Fund (NYSEArca: XLRE) rose 2.4%.

Meanwhile, Simon Property Group shares jumped 14.9% on Wednesday. SPG makes up 3.7% of SCHH, 3.7% of RWR, and 2.9% of XLRE.

Mall operator Simon Property Group was among the best S&P 500 performers and enjoyed its biggest one-day move since early April. Another shopping center operator, Kimco Realty Corp (NYSE: KIM), also rallied 11.3%.

“We continue to believe that Simon’s portfolio of Class A malls provides one of the most attractive retail portfolios,” Morningstar analyst Kevin Brown said in a note, according to TheStreet. “However, we are worried about what sales growth will look like for even the best properties as the fallout from the coronavirus will likely be felt by brick-and-mortar retail for several years.”

The reopening of local economies and easing shutdown measures are bolstering the outlook for a rebounding U.S. economy. Further adding to the optimism, the country has not seen any real spike in new coronavirus infections, contrary to many experts’ fears, while overall case numbers continue to trend downward, the Motley Fool reports.

Consumer confidence data has been positive and the service sector of the economy rebounded more than expected last month.

Credit card company data, such as Visa, recently revealed U.S. payment volume only dipped by 5% year-over-year in May, compared to an 18% drop in April, revealing that American consumers are still willing to get out and spend.

Meanwhile, retailers are also revealing promising data, especially those that operate brick-and-mortar physical sites. American Eagle Outfitters showed demand has been extremely strong with sales in 556 locations averaging 95% of normal levels. Abercrombie & Fitch also recently stated demand was returning as well.

Cheesecake Factory, a major tenant in Simon’s malls, revealed its reopened restaurants are enjoying sales volumes of 75% for the same period last year.

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