Flight to Safety Rewrites Net Lease Investment Rules

An emerging trend in net lease investment is a pronounced flight to safety. It’s poised to reshape the industry in 2026. Amid geopolitical turbulence, private investors are prioritizing stability and gravitating toward strong credit profiles, durable real estate fundamentals and resilient demographics to preserve wealth.

Private investors remain the dominant buyer segment for stabilized net lease assets, and their preferences will continue to drive pricing and transaction velocity across the sector. Today’s investor is more disciplined and informed than ever before. They are targeting corporate guarantees, long-term leases and business-friendly locations and, notably, they are placing greater emphasis on the underlying real estate itself. With access to advanced AI-driven research tools, investors are analyzing local market conditions with a depth and precision that marks a meaningful shift from prior cycles.

This flight to safety is, in part, a response to global instability, including the Iran conflict and the resulting rise in the 10-year Treasury yield. Equity markets have reacted with increased volatility, declining approximately 7 to 10 percent since the onset of the conflict. Yet, within this uncertainty lies opportunity. As confidence in Wall Street wavers, high-net-worth investors are increasingly motivated to reallocate capital into Main Street real estate—where net lease investments offer predictable income streams and a more conservative risk profile.

That said, a disciplined approach to capital deployment is critical. While “credit is king” remains a guiding principle, recent history has demonstrated that creditworthiness can be fleeting. Walgreens serves as a cautionary example of how quickly investment-grade status can erode. As such, investors are best served by underwriting the real estate first by focusing on rent levels, replacement costs and market fundamentals, rather than relying solely on tenant credit ratings.

Within this framework, true ground leases stand out as a compelling strategy, particularly for 1031 exchange buyers with limited depreciation benefits remaining. When tenants fund their own construction, it signals a strong long-term commitment to the site. Investors benefit from lower rent structures aligned with stronger fundamentals, coupled with zero landlord responsibilities—making ground leases one of the purest forms of passive investment in the net lease space.

For investors who need depreciation, pre-2020 construction offers a strategic advantage. These assets were developed before the sharp escalation in land and construction costs following COVID-19–cost increases that have exceeded 50 percent in many markets. As a result, existing tenants in these properties often lack viable relocation options, creating a powerful incentive to renew leases and enhancing long-term income stability.

Additionally, second-generation properties are gaining traction as an attractive investment category. These assets, typically located in established trade areas, allow new tenants to enter at more sustainable rent levels due to the cost efficiencies of retrofitting vs. ground-up development. Investors, in turn, can acquire high-quality real estate at a basis that is often unattainable with new construction, while still benefiting from strong market fundamentals.

As for sellers…

On the sell side, developers and property owners are adapting to this evolving investor mindset. Recognizing the heightened demand for both credit quality and real estate durability, sellers are becoming more selective in tenant partnerships and more disciplined in underwriting. Strategies such as negotiating tenant construction contributions, pursuing larger-scale developments to achieve cost efficiencies and favoring ground lease structures are increasingly common. These approaches not only align with investor demand but also produce more sustainable rent levels and stronger long-term asset performance.

In this new environment, success in net lease investment will hinge on a balanced approach, one that prioritizes both credit and fundamentals while capitalizing on opportunities created by market dislocation. The flight to safety is not merely a defensive posture; it is a strategic evolution that is redefining how investors evaluate risk, allocate capital and build lasting wealth in the net lease sector.

Britt Raymond is executive vice president & managing principal of SRS Capital Markets. Kyle Fant is executive vice president & managing principal.