Bank Of America upgraded four retail REITs from "neutral" to "buy," including mall owners CBL & Associates, the Macerich Co. and Simon Property Group, as well as shopping-center own New Plan Excel Realty Trust. "The consumer continued to spend in moderation in 2006 despite higher energy costs, higher borrowing costs and a weaker housing market," the report says.

The mall sector will be helped next year by fewer store closings and demand being driven by expanding new concepts, luxury chains, restaurants and international retailers. The report also notes that most mall owners have large development and redevelopment pipelines. Bank Of America has also lowered its cap rate expectations on class A mall sales by 50 to 75 basis points, estimating that they will trade in the 5% to 5.5% range.

Meanwhile, some strip-center owners are benefiting from a lower-than-expected negative impact that Wal-Mart has had on grocery chains. Center owners that focus more on development than acquisitions are preferred by the firm, and the industry could soon see private-equity buyouts of some operators as it has in other real estate sectors, the report says.