Future Shop closure creates worries for REIT growth prospects

Growing competition from online retailers has led brick and mortar retailers such as Future Shop to close in recent years, which is expected to have a negative impact on REITs in the coming years.

The demise of Future Shop highlights just how much pressure investment trusts will face within the coming years, say analysts.

Best Buy Co. Inc. abruptly shuttered 66 Future Shop stores a week ago as it faces growing competition from online retailers such as Amazon.com Inc. Mark Rothschild, analyst at Canaccord Genuity, said the closures show that REITs will be pressured as brick-and-mortar retailers still lose ground to online competition.

“The next few years are likely to be challenging for retail landlords as they must manage with the impact of Target leaving Canada and lots of other store closures,” he explained. “We expect some small effect on retail REIT vacancy rates, and a more muted pace of net operating income growth over the next few years.”

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