Shopping Center REITs: Undervalued Consolidators in a Restructuring Retail Sector

The retail real estate sector is undergoing a profound transformation, driven by e-commerce, shifting consumer preferences, and the rise of experiential commerce. Amid this restructuring, shopping center REITs like Federal Realty Investment Trust (FRT) and Macerich (MAC) are emerging as strategic consolidators, leveraging disciplined capital allocation and creative redevelopment to unlock value in a fragmented market. These REITs are not merely surviving the transition—they are actively reshaping it, acquiring distressed assets, repositioning underperforming properties, and capitalizing on the enduring demand for physical retail experiences.

Federal Realty: Precision in Portfolio Optimization

Federal Realty has long been a paragon of capital discipline, and its 2023–2025 strategy underscores this ethos. The REIT’s acquisition of two open-air retail centers in Leawood, Kansas, for $289 million [1], paired with the sale of the Hollywood Boulevard portfolio in Los Angeles for $69 million [2], exemplifies a “recycling” approach. By divesting mature assets and reinvesting proceeds into high-growth markets, Federal Realty maintains a portfolio with 93.6% occupancy and a 95.4% leased rate as of Q2 2025 [1].

The company’s diversification into mixed-use developments, such as the 258-unit residential project at Santana Row [1], and partnerships like its EV charging infrastructure collaboration with Mercedes-Benz [1], further insulate it from retail sector volatility. Financially, Federal Realty’s Q2 2025 results—$1.91 FFO per share and a 10% cash basis rollover growth in leasing [1]—highlight its ability to generate consistent returns. Its raised 2025 FFO guidance to $7.16–$7.26 per share [1] reflects confidence in this strategy.

Macerich: Aggressive Redevelopment and SNO Pipeline

Macerich’s approach is more aggressive, focusing on repositioning underperforming assets and capturing growth in industrial-friendly retail formats. The $290 million acquisition of Crabtree Mall in Raleigh, North Carolina, is a case in point. With a $60 million redevelopment plan targeting 90% occupancy and a 12.5% yield by 2028 [2], Macerich is betting on the Research Triangle’s tech-driven population growth. Complementing this is a $130 million signed-not-open (SNO) pipeline, expected to deliver $130 million in incremental NOI by 2028 [2].

Despite a Q2 2025 FFO miss ($0.33 vs. $0.34 estimate) and a 92% portfolio occupancy [2], Macerich’s 10.5% leasing spreads and 137% year-over-year lease growth [2] demonstrate its ability to outperform industry averages. The REIT’s “Path Forward” strategy—deleveraging and targeting high-growth industrial markets [3]—positions it to capitalize on the hybrid retail-industrial trend, where logistics-friendly properties serve as distribution hubs for e-commerce.

Navigating E-Commerce and Interest Rate Risks

Both REITs face headwinds from e-commerce and interest rate sensitivity. However, their strategies mitigate these risks. Federal Realty’s long-term leases and prime urban locations provide stability, while Macerich’s focus on experiential tenants (e.g., dining, fitness, and service-based retailers) creates in-person demand [1]. The omnichannel model—where physical stores act as pickup/drop-off points for online orders—has also preserved demand for brick-and-mortar spaces [4].

Interest rate sensitivity remains a concern, as REIT valuations often correlate with bond yields. Federal Realty’s strong occupancy rates (93.6% as of Q2 2025 [1]) and Macerich’s high-yield redevelopment projects (e.g., Crabtree Mall’s 12.5% target [2]) offer some insulation. However, broader monetary policy shifts could pressure cap rates and valuation multiples, as seen in the Morningstar US Real Estate Index’s underperformance in Q2 2025 [2].

Conclusion: Consolidators in a Restructuring Era

Federal Realty and Macerich are emblematic of a new breed of retail REITs: consolidators with the capital, expertise, and vision to transform a sector in flux. By acquiring distressed assets at discounts, redeveloping underperforming properties, and curating tenant mixes that blend retail with experiential and industrial uses, they are not only surviving but thriving. For investors, these REITs represent compelling opportunities in a market where strategic execution and adaptability are paramount.

Source:
[1] Federal Realty Investment Trust Reports Second Quarter 2025 [https://ir.federalrealty.com/news-releases/news-release-details/federal-realty-investment-trust-reports-second-quarter-2025]
[2] How the Crabtree Acquisition and $130M SNO Pipeline [https://www.ainvest.com/news/macerich-strategic-acceleration-crabtree-acquisition-130m-sno-pipeline-position-reit-retail-industrial-real-estate-outperformance-2508/]
[3] Macerich Q2 FFO Misses Estimates, Occupancy Declines Y/Y [https://finance.yahoo.com/news/macerich-q2-ffo-misses-estimates-165700509.html]
[4] E-commerce and the Future of Retail Real Estate 2025 [https://crowdstreet.com/resources/investment-fundamentals/e-commerce-impact-on-retail-properties]