Even rising interest rates can’t stop traditional retail REITs from cashing in on shift to residential

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An artist’s rendering of a RioCan REIT mixed-development project in Toronto known as The Well.Handout

Retail REITs are poised to reap tremendous benefits from a number of tailwinds over the next couple of years, despite rising interest rates and the growth of e-commerce, as they pivot to mixed-use and residential development, analysts say.

Apartment and retail REITs have been moving in opposite directions over the past year, with residential generally outperforming as retail lagged due to Amazon-fuelled fears of the demise of bricks and mortar.

No surprise, then, that a number of the retail REITS — RioCan, SmartCentres and Choice Properties, to name a few — have announced the move into residential and mixed-use development.

But now, as the Bank of Canada signals more aggressive rate hikes — boosting mortgage costs and pulling capital away from income stocks — the question is whether the retail REITs have missed their opportunity.

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