Americas Real Estate: REITs — 3Q26 Retail Preview: Strip center valuation discounts persist despite a continued favorable set-up and expected upward FFO revisions

Ahead of retail REIT earnings, which begin on October 26 with PECO reporting after the market close, we review key topics across the sector. Key themes include: (1) Strength in the retail supply vs. demand picture, driven by leasing trends, store openings/closings and minimal retailer bankruptcies, with resulting tailwinds to occupancy (quality and level) plus pricing — new retail supply remains extremely limited (0.2% of inventory in 2025, ~0.3% expected in 2026), 3Q26 net absorption is expected to be the strongest third quarter since 3Q16 for malls and since 3Q23 for strips, and SKT, PECO, BRX and KIM continue to achieve double-digit leasing spreads. (2) Resulting SS NOI and FFO growth, where we expect continued revisions higher over the course of 2026;