After roughly a decade of weakness, brick-and-mortar retail properties are now seeing improved business conditions, presenting a renewed opportunity for investors in these real estate securities, according to Fidelity Portfolio Manager Sam Wald.
“Given years of essentially no new construction, there’s now a shortage of retail properties in high-quality locations,” says Wald, who co-manages Fidelity® Stock Selector Mid Cap Fund (FSSMX). “There’s also good news on the demand side, as more brick-and-mortar retailers are successfully pursuing an ‘omnichannel’ strategy, which combines online shopping and in-person pickup or returns.”
In actively co-managing the diversified domestic equity strategy focused on mid-caps, Wald employs a stock-by-stock investment approach. Together with Fidelity’s highly capable team of analysts, he assesses the relative appeal of individual real estate securities as he seeks to capitalize on pricing discrepancy in the market.
For an extended period, retail property owners struggled amid excess supply of retail square footage and insufficient demand due to the acceleration of e-commerce, Wald notes.
“For much of the past decade, I’ve avoided investing the fund in REITs – with no exposure at all to mall REITs – because of the poor supply/demand backdrop,” says Wald. “But with the retail property environment beginning to improve, I’ve increased the fund’s exposure to this category.”
Learn More
He points out that retail REITs have benefited from a far more favorable supply/demand environment, and certain stocks in the industry appear attractively valued as of April 30.
He views both factors as potential catalysts for retail property owners, as constrained supply and rising demand for in-person retail experiences could support longer-term growth in rental income.
Yet even as conditions have improved, retail rents remain 30% to 100% below levels that would justify new construction, suggesting upside potential for the stocks, according to Wald.
The fund’s REIT holdings at the end of April included Macerich (MAC), which has been in the portfolio since 2024 and remains a favored mall-sector security.
“I particularly like Macerich because I believe the company may benefit from improved industry fundamentals, and because its fairly new management team has made good progress in its business turnaround,” he says.
Among shopping center REITs, Wald points to Urban Edge Properties (UE) as a fund holding he believes offers a strong risk/reward trade-off, explaining that shares of the shopping center REIT have gained increased investor recognition lately due to improving fundamentals.
“Management has done a good job enhancing its property portfolio, which I believe offers the potential for outperformance,” he concludes.
For specific fund information, including full holdings, please click on the fund trading symbol above.
Sam Wald is a portfolio manager in the Equity division at Fidelity Investments.
In this role, Mr. Wald manages a number of real estate/REIT equity portfolios offered in various stand-alone and multiasset class vehicles, which are distributed across various distribution channels. He is also a co-manager of the FIAM Small/Mid Cap Core Commingled Pool and FIAM Small/Mid Cap Core Real Estate Sub Portfolio.
Prior to assuming his current position in 2004, Mr. Wald held various other positions at Fidelity Management & Research Company LLC, including that of research analyst and research associate in the Equity Research division covering real estate, REITs, and specialty and generic pharmaceuticals stocks. He has been in the financial industry since joining Fidelity in 1996
Mr. Wald earned his bachelor of science degree in finance, magna cum laude, from Yeshiva University. He is also a CFA® charterholder and he earned the CFA institute certificate in ESG investing and has been published in The Journal of Portfolio Management.