U.S. Retail REITs 2Q Earnings Preview: Earnings remain resilient, with further upside potential for valuations and guidance

Overview

This report is Goldman Sachs' sector preview ahead of the release of second-quarter 2026 results for U.S. retail REITs. Its core view is that retail REIT earnings remain resilient and still have further upside potential. Supporting factors include continued constraints on new supply, strong tenant leasing demand, improving occupancy, double-digit leasing spreads, manageable tenant bankruptcy and bad-debt pressure, and relative valuations that have not yet fully reflected fundamental improvement.

Core views

The report believes retail REITs are benefiting from both sides of the supply-demand equation: very few new developments on the supply side, while retailers continue to open stores actively and view physical locations as important pillars of profitability and online sales. This is driving higher occupancy, better tenant mixes, and stronger rental pricing power. Goldman Sachs expects 2026 same-store NOI and FFO guidance may continue to be raised, as occurred in 2025, and believes its 2027 FFO estimates are generally above FactSet consensus. Although retail REITs have rallied, they still trade at discounts to the REIT sector and the S&P 500, leaving room for some stocks to outperform.

Analysis framework

The report analyzes supply-demand conditions, leasing spreads, occupancy and SNO pipelines, tenant openings, closures and bankruptcy risk, same-store NOI and FFO guidance, relative valuation multiples, traffic, and resilience in high-end consumption, and compares BRX, SPG, SKT, PECO, KIM, and MAC.

Methodology notes

• Industry Supply-Demand AnalysisNew Supply and Leasing Demand Framework

  Low supply combined with strong leasing demand

  By comparing new retail real estate supply, construction starts, net absorption, store openings and closures, and tenant leasing appetite, the report assesses the sustainability of occupancy and rental pricing power.

• Operating Metrics AnalysisOccupancy, SNO, and Leasing Spread Analysis

  Occupancy quality and rental repricing

  The report focuses on tracking signed-not-open space, economic occupancy, cash leasing spreads, and tenant mix upgrades to assess future NOI and FFO growth.

• Earnings Forecast AnalysisSame-Store NOI and FFO Guidance Revision Framework

  Momentum in earnings guidance revisions

  Using the experience of 2025 guidance increases, 2026 bad-debt and bankruptcy pressure, leasing volume, and differences from consensus forecasts, the report assesses the likelihood of upward revisions to 2026 earnings guidance.

• Valuation AnalysisRelative P/FFO Discount Analysis

  Valuation discount to REITs and the S&P 500

  The report compares retail REITs with the overall REIT sector, the S&P 500, and the equal-weighted S&P 500 based on differences in NTM FFO or P/E multiples to assess the scope for further narrowing of valuation discounts.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• BRX

  Buy-rated retail REIT and strip-center-related name

  Strengths

  Relatively low occupancy and a sizable SNO pipeline provide earnings upside, with a 17.2% 1Q26 cash leasing spread.

  Weaknesses

  A limited proportion of rents expire in 2026, so the contribution from renewal leasing spreads to near-term upside may be constrained.

  Comparison

  The report says BRX's discount to KIM has nearly narrowed, but it still trades at an approximately 35% discount to the REIT sector.

  Risks

  A weakening macroeconomic consumption environment, declining tenant demand, slowing leasing spreads, or rising bad-debt pressure.

• SPG

  Buy-rated shopping-center REIT

  Strengths

  High occupancy, strong new-lease rents, demand from luxury tenants for renewals, and resilient high-end consumption support pricing power.

  Weaknesses

  Occupancy is already at a high level, so further growth depends more on tenant-mix upgrades and rental increases.

  Comparison

  SPG's multiple is at its highest level since the third quarter of 2016 and carries a premium to the simple average of REITs.

  Risks

  A slowdown in high-end consumption, sales per square foot below expectations, or improvement already being partially reflected in valuation.

• SKT

  Buy-rated outlet REIT

  Strengths

  High occupancy, a leasing spread still around 10%, and supported demand for physical discount retail.

  Weaknesses

  Successful prior rent resets have raised the comparable base, potentially putting pressure on leasing spreads.

  Comparison

  SKT still trades at an approximately 20% discount to the REIT sector, above its historical average discount during 2013-2015.

  Risks

  Slowing tenant sales growth, rising occupancy costs, or weaker-than-expected re-leasing and tenant-mix optimization.

• PECO

  Buy-rated retail REIT

  Strengths

  Occupancy above 95%, strong FFO growth implied by guidance, and potential for mid-single-digit FFO growth to serve as a catalyst.

  Weaknesses

  High occupancy limits incremental gains from simply filling vacant space.

  Comparison

  The report includes PECO among Buy-rated retail REITs and expects strong 2026 FFO growth.

  Risks

  Declining tenant demand, weak consumption, or less-than-expected valuation expansion.

• KIM

  Neutral-rated strip-center REIT

  Strengths

  A sizable SNO pipeline, a 12.7% 1Q26 cash leasing spread, and room for improvement in economic occupancy.

  Weaknesses

  The rating is Neutral, and the report does not include it on the Buy list.

  Comparison

  BRX's valuation discount to KIM has nearly narrowed to approximately 4.4%.

  Risks

  Leasing demand below expectations, insufficient development or infill-market opportunities, or limited upward revisions to guidance.

• MAC

  Shopping-center REIT under observation

  Strengths

  Lower in-place occupancy implies long-term potential to fill vacancies and increase rents; sales growth and lower occupancy costs may support long-term rental increases.

  Weaknesses

  The current focus is more on filling vacancies than on large-scale tenant upgrades; the company no longer discloses leasing spreads.

  Comparison

  MAC's multiple expanded significantly over the past year, while its share-price performance was broadly similar to SPG.

  Risks

  A significant valuation re-rating has already occurred, occupancy improvement taking longer to materialize, or the management team's transformation falling short of expectations.

Key data

• Retail Real Estate Supply Growth0.3% in 2025; CoStar forecasts 0.3% in 2026Significantly below apartment, industrial, warehouse, and other real estate types, making it a key fundamental support for retail REITs.
• 1Q26 Cash Leasing SpreadsBRX 17.2%, PECO 13.5%, KIM 12.7%, SKT 10.5%, average 13.5%Retail REITs that disclosed this metric continued to maintain double-digit leasing spreads.
• Occupancy and SNOKIM and BRX have sizable SNO pipelines; PECO, SKT, and SPG had occupancy above 95% at the end of 1Q26BRX and KIM have greater benefits from improving economic occupancy, while PECO, SKT, and SPG can focus more on tenant-quality upgrades.
• FFO Growth at Buy-Rated NamesGoldman Sachs expects approximately 4%-7% 2026 FFO/share growth for Buy-rated namesThe report specifically notes implied FFO growth of approximately 8.3% for PECO and approximately 5.6% for SKT.
• Sector Relative ValuationRetail REITs at approximately 15.6x NTM FFO; 24% discount to the S&P 500 and 20% discount to the REIT sectorThe report believes fundamentals are better than during 2017-2019, leaving room for further narrowing of the valuation discount.
• Relative Growth of Retail REITsAverage 2026E/2027E FFO growth of approximately 5.9%Among the real estate types covered by Goldman Sachs, this is below only Net Lease at approximately 6.3%.
• Fixed-Rent ShareApproximately 97% of rental revenue at shopping centers and outlets is fixed rentThe report believes the market may underestimate the fixed nature of rental revenue for these assets; sales growth can provide additional upside rather than relying primarily on percentage rent.

Impact & implications

If the report's thesis plays out, retail REITs could benefit from multiple catalysts during the 2026 earnings season, including upward revisions to same-store NOI and FFO guidance, narrowing valuation discounts, and relative share-price outperformance. In terms of asset selection, the report favors BRX, SPG, SKT, and PECO, which offer room for occupancy improvement, strong leasing spreads, tenant-quality upgrades, and valuation discount recovery.

Risks

• Weakening macroeconomic conditions and consumer spending, particularly expanding pressure on lower-end consumers in a K-shaped economy.
• Slowing tenant demand for store openings or increasing store closures, weakening occupancy and rental pricing power.
• Renewed increases in retailer bankruptcies, bad debt, or watchlist pressure, weighing on same-store NOI and FFO.
• Leasing spreads declining from double-digit levels, particularly for companies such as SKT that have completed substantial rent resets.
• Limited room for further valuation expansion after the rally; changes in interest rates or risk appetite for the REIT sector could pressure multiples.
• The report's forecasts are above consensus; if expected 2026 and 2027 FFO upgrades do not materialize, share prices could come under pressure.

What to watch

• PECO's second-quarter retail REIT earnings release beginning after the market close on July 23 and subsequent changes to guidance.
• Whether BRX and KIM convert their SNO pipelines, improve economic occupancy, and raise same-store NOI guidance.
• Whether SKT, PECO, BRX, and KIM can continue to maintain double-digit cash leasing spreads.
• Tenant sales per square foot, occupancy costs, tenant-mix upgrades, and new-lease rents at SPG and MAC.
• Retailer store-opening plans, store-closure announcements, bankruptcy events, and changes in bad-debt rates.
• Whether retail REIT valuation discounts to the REIT sector, the S&P 500, and the equal-weighted S&P 500 continue to narrow.