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MSCI Cites Retail's Underlying Strength

However, an analysis of sector performance shows that “the risks are not evenly distributed across metropolitan markets and tenant types.”

By Paul Bubny | paulbubny | Updated on September 21, 2017

Exterior of Whole Foods store A Whole Foods Market in Folsom, CA. Grocery retailers have lower than average credit risk and higher potential markups in their leases. (Photo: Whole Foods Market)

NEW YORK CITY—Beset by non-stop competition from online channels, retail real estate is often seen as a risky investment proposition these days. Yet the numbers don’t quite bear out this thesis, according to research from MSCI.

“Despite the negative headlines, retail remains a sizable and important part of the investment landscape, accounting for nearly 22 cents of every dollar in contracted rent,” according to MSCI. An analysis of property income risk and performance as of this past June shows that although the sector underperformed commercial real estate overall in the second quarter, only the Industrial sector produced a lower vacancy rate and income returns have held steady.

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