Tickers in this Article: FTY, AMZN, M, ICF, RTL, TCO, JWN, PEI, WRI, MAC, TGT
As the U.S. economy has pushed its way forward, real estate has also surged in a positive direction. Broad based funds like the iShares FTSE NAREIT Real Estate 50 (NYSE:FTY) have soared since their hitting their lows. A mixture of market forces and renewed investor interest have helped the office, apartment and medical real estate sub-sectors return to their former pre-crash glories. Facing the one-two punch of plummeting consumer spending and high vacancy rates, the owners of shopping malls and retail outlets haven't been so lucky. However, there have been some positive signs as of late and some analysts are predicting a major resurgence in the shopping mall sector. (To learn more about real estate trusts, check out How To Analyze Real Estate Investment Trusts.)

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Showing a Rebound
During the go-go dotcom days and the birth of Amazon.com (Nasdaq:AMZN), Time Magazine ran a cover story entitled, "Kiss your Mall Goodbye: Online shopping is faster, cheaper and better." With consumers still clinging to the new recessionary mind-set, a similar headline could be written today. According to research firm Reis, nationwide vacancies have hit their highest levels in at least 11 years. However, in spite of the higher vacancy rates, regional malls and strip mall REITs saw total returns of about 35% in 2010, besting the S&P 500's performance.

While the middle class has struggled, malls catering to the high and low-end have seen vacancy rates fall below 7%. Triple net real estate companies all average above 96% occupancy, close to pre-recession numbers. Mall anchor stores such has Macy's (NYSE:M) have reported better earnings and sales following huge cuts amid the recession. Better sales at these locations have translated to higher rents for mall operators. Two years ago many operators were forced to deal with concessions from tenants as recession hurt the sector. In Manhattan's Times Square, retail rents now exceed levels reached before the recession. Markets such as Washington DC and Houston, where economic growth has once again returned, have also seen higher lease rates.

Analysts also think that the worst is over for the retail real estate sector. Retailer bankruptcies are predicted to be light and appear likely to remain so for the remainder of the year. In addition, these companies have deleveraged their balance sheets during the crisis. Virtually all of the companies within the sector sport well-capitalized balance sheets and many of the strongest players have taken advantage of weaker REITs through acquisition and fire-sale pricing. Mall and shopping center re-development has helped the sector see increased productivity rates for the first time since 2007. Productivity rates have risen 8% versus 2009 numbers to $469 per square foot. (With the economic conditions in the U.S. slowly improving it is important to identify when the market will turn. For more information, check out Using Consumer Spending As A Market Indicator.)

Channeling Your Inner Mall-Rat
With the rising fuel and food costs and the poor job market making life difficult for the average consumer, the retail REIT sub-sector might not seem like a great place to park some investment money. However, the economic downturn has made the overall stronger and represents a value among real estate assets. Investors looking for a catch-all retail REIT investment can do so with the iShares FTSE NAREIT Retail (NYSE:RTL). Similarly, the iShares Cohen & Steers Realty Majors (NYSE:ICF) focuses on the largest REITs across a variety sectors including the space. For those looking to add individual names, here are a few picks.

Focusing on high-end and luxury malls, Taubman Centers (NYSE:TCO) has seen traffic at its 26 locations pick-up and sales jump by 14.3% in the wake of the recession. Major anchor stores such as Nordstrom (NYSE:JWN) are contributing to that growth. Overall, Taubman should continue to benefit from the high-end consumer is more immune from inflationary pressures than other shoppers. Shares of Taubman yield 3.10%. Outlet centers have become the "sweet spot" of the retail real estate sector. These shopping plazas offer lower priced versions of many premium brands. Tanger Factory Outlet Centers (NYSE:SKT) offers a pure play on these types of stores, while shopping mall leader Simon Property Group (NYSE:SPG) owns 74 outlet centers internationally. Both REITs yield around 3%.

Finally, for those investors willing to bet on the middle-market, REITs such as Pennsylvania Real Estate Investment Trust (NYSE:PEI), Weingarten Realty Investors (NYSE:WRI) and Macerich (NYSE:MAC) all offer yields above 4%. (To help you determine how a to value a REIT, read How To Assess A Real Estate Investment Trust (REIT).)

The Bottom Line
As one of the hardest hit sectors during the global financial crisis, the commercial real estate market is making a comeback. Despite the worries on the consumer front, shopping mall and retail REITs are once again experiencing growth. After consolidation and cost cutting during the recession, many are seeing higher rental rates and sales across their locations. For investors, the time may be right to add the sector to a portfolio. (REITs have become a great option for those who want to add Real estate into their portfolio, to learn more about them, check out 5 Types Of REITs And How To Invest In Them.)

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