The sell-off of the shopping center REITs has been “overdone,” in the view of Matt Kopsky, a REIT analyst with Edward Jones. “The higher-quality, grocery-anchored centers are in a much better position today, the cap rates stayed sticky for these properties, and the fundamentals have remained consistent,” Kopsky asserted. “There is just a fear about what is happening in the retail environment.”

There are two different stories going on in the retail property market, according to Jeffrey S. Edison, CEO and president of Cincinnati-based Phillips Edison & Co., an internally managed REIT. “While power centers and ‘B’ and ‘C’ malls are struggling, the grocery-anchored part of the retail real estate market has continued to be stable.” Phillips Edison, which owns and manages roughly 350 shopping centers across 32 states, saw growth last year, Edison says. “The strength of grocery-anchored shopping centers has been driven by very positive supply-and-demand dynamics. While there has been very limited new development, we continue to see strong demand for our small-store tenant space.”

Indeed, less than 1 percent of existing inventory is new supply, Kopsky says, pointing out that this is “well below historical levels. Demand is still healthy for high-quality centers, but weak for retail overall.”

On a general note, the nation’s low unemployment rate and chugging economy has given the consumer more confidence to go out and spend. And of course, when retailers do better, so do the landlords. The retail real estate industry has already faced down several perceived threats. For one thing, fears about Internet commerce have proved overblown. Online sellers are actually becoming physical tenants, to a large extent, because that is what they have to do, says Dana Telsey, CEO and chief research officer at the New York City–based Telsey Advisory Group, a consulting, banking and asset-management firm. “If you want to be a well-known brand, you have to operate in multiple channels of distribution,” she said. “Physical needs digital, and digital needs physical. Offering product differentiation in varied environments is an opportunity to gain market share.”

On the grocery side, with the delivery business picking up, there was fear of an Internet-only strategy having a severe impact on supermarket sales. Then Amazon.com acquired Whole Foods, and retail real estate landlords exhaled in relief. “When Amazon realized Internet-only wasn’t going to work, that took a big risk out of our business,” said Edison.

None of this is to suggest that the Internet will have absolutely no impact on the grocery world at all, but it does mean that it will take a while for things to get there, and that the manifestation will be different in different regions. South Korea, for one, experienced one of the biggest online-grocery penetration rates — up in the high teens in terms of percentage, according to Edison. “Nowhere else in the world have online grocery sales gotten above 10 percent,” Edison said. “In the United States, it’s about 2 percent to 4 percent.”

Kopsky, who covers Kimco Realty and Weingarten Realty, says those two shopping center REITs (along with peers) are selling off noncore assets, which will depress earnings in the short term but will also strengthen the companies over the long haul. “The shopping center REITs have been selling noncore assets at about a 7 percent cap rate, and they are doing so to improve the quality of the portfolio,” said Kopsky. “When you sell at a 7 percent cap rate and deploy the capital into higher-quality centers, the cap rates at purchase are much lower, so you see an earnings dilution. This affects earnings in the near term, but improves quality overall.”

On the negative side, the growth retailers are not expanding as fast as they had been in previous decades. But on the brighter side, the old-style junior department stores are giving way to experiential tenants: restaurants, movie theaters, fitness centers and the like, Kopsky says.

The shopping center industry is in transformation mode, Telsey points out. “This is an environment where the pace of change is happening very fast,” she said. “We are seeing new shopping center types emerge. More services are coming front and center. Now you have gym classes, libraries, different types of food offerings — anything to engage the consumer.” Shopping centers will become known as “community-engagement centers” as people spend more time at these places, Telsey predicts. “The activity of buying,” she said, “will correlate with the activity of doing.”