As Retail REITs Recover from the Pandemic, Substantial Risks Remain for Some

In March 2020, DBRS Morningstar set out its expectations for the impact of the Coronavirus Disease (COVID-19) on real estate investment trusts (REITs) and commercial real estate (CRE) companies in the U.S and Canada. It was our expectation that certain sectors, including retail, would experience significant stress. This turned out as expected, to varying degrees, within the U.S. retail REIT sector depending upon subsector type and retailer tenant offerings. We expect retail REITs with a greater preponderance of nondiscretionary offerings, open-air formats, manageable leverage, and better quality retailer tenants to return to pre-coronavirus levels over the next two years; to the extent that one or more of these elements are not meaningfully applicable, recovery will be less likely.