{"id":1004810690,"date":"2026-09-02T10:08:55","date_gmt":"2026-09-02T18:08:55","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004810690"},"modified":"2026-09-02T10:08:57","modified_gmt":"2026-09-02T18:08:57","slug":"why-net-lease-investing-is-all-about-the-real-estate","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/why-net-lease-investing-is-all-about-the-real-estate\/","title":{"rendered":"Why Net Lease Investing Is \u2018All About the Real Estate\u2019"},"content":{"rendered":"\n

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AI image by Sekai\/Adobe Stock<\/figcaption><\/figure><\/div>\n\n\n

A volatile investment environment marked by high interest rates, geopolitical strife, rising inflation and a fluctuating stock market is driving a run-up in net lease investment<\/a>.<\/p>\n\n\n\n

\u201cInvestors are gravitating toward strategies that blend value-add upside with core-like income characteristics,\u201d said Todd Stender, managing director at LNL Capital, which specializes in financing net lease assets. \u201cIn that context, net lease stands out.\u201d<\/p>\n\n\n\n

Not all net lease is created equal, however. Higher borrowing costs, uneven property performance and overall economic uncertainty require investors to be extra-discerning about tenant credit and the residual value of the real estate.<\/p>\n\n\n\n

Net lease is having a moment<\/strong><\/h2>\n\n\n\n

Net lease was once considered a fixed-asset investment like bonds and Treasuries. That mindset changed when retailers that were incredibly strong 10 years ago, like Walgreens and Bed, Bath & Beyond, experienced shifts in their markets that affected the strength of their business and investment profile, noted Josh Dicker, an associate vice president with Northmarq\u2019s Chicago office.<\/p>\n\n\n\n

Now both private and institutional investors are zeroing in on net lease\u2019s underlying real estate advantages relative to fixed-income assets, including stable, long-term, passive investment opportunities. Long-term, triple-net lease contracts and built-in rent escalators insulate assets from inflation and cyclical market volatility. Net leases also minimize vacancy risk, eliminate tenant improvement costs and shift responsibility for operating costs\u2014taxes, insurance and property maintenance\u2014to the tenant.<\/p>\n\n\n\n

Green Street\u2019s monthly Commercial Property Price Index<\/a> revealed that net lease assets outperform other property types in cyclical downturns. For example, the Net Lease Index declined 7.6 percent in reaction to COVID-19 pandemic, compared to the 11.2 percent drop in the All-Property Index. The Fed\u2019s tightening of interest rates resulted in net lease declining 18.6 percent, while the All-Property Index fell 21.4 percent.<\/p>\n\n\n

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Investors are gravitating toward the reliable rental incomes, transparent leases and minimal management burden of net lease, said Will Pike, President of U.S. Industrial & Logistics Capital Markets & Managing Director of Net Lease Properties at CBRE.<\/figcaption><\/figure><\/div>\n\n\n

Today, sophisticated allocators recognize that NNN can generate favorable risk-adjusted returns compared to corporate bonds due to the residual value of hard assets and legal protections of lease affirmation in bankruptcy, according to an LNL Capital white paper<\/a>.<\/p>\n\n\n\n

Private investors, which include 1031-exchange investors, retirement-age seniors, family offices, private funds and high-net-worth individuals, are the most active participants in net lease investment, according to a CBRE report<\/a>. Private investment was up 30 percent year-over-year in Q4 2025, with $9.1 billion in investment representing roughly 57 percent of the quarter’s $16.0 billion total.<\/p>\n\n\n\n

Institutional investors, which have long-valued net lease for its long-term leases and compelling risk-adjusted returns, have also increased their participation in net lease since 2020 and now are the second largest capital source, comprising about 27 percent of NNN acquisitions volume per year on average, noted Sharrin.<\/p>\n\n\n\n

Large recent commitments include Blue Owl purchasing Sila Realty Trust, a net lease REIT with properties in health care and medical office, for $2.5 billion in July, and Goldman Sachs Asset Management agreeing to buy LCN Capital partners, an investment manager specializing in sale-leasebacks, build-to-suits and triple net leases with $3 billion in assets. Single-asset net lease transactions are also on the rise across numerous business sectors.<\/p>\n\n\n\n

Net lease investments can be more sensitive to benchmark interest rates than other commercial real estate asset classes, and there is a binary risk: If the tenant vacates, income stops, noted William Pike, CBRE’s president of U.S. Industrial & Logistics Capital Markets\u00a0and leader of CBRE National Partners. <\/p>\n\n\n\n

\u201cThat said, the structural advantages of the asset class far outweigh the risks for most investors, particularly when assets are underwritten carefully and tenants are well-credentialed,” Pike noted.<\/p>\n\n\n\n

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Source: The Boulder Group Net Lease Market Report<\/figcaption><\/figure>\n\n\n\n

Where yields are strongest<\/strong><\/h2>\n\n\n\n

Currently, industrial net lease assets supported by long-term drivers like e-commerce, logistics growth and reshoring of manufacturing are delivering some of the strongest, risk-adjusted yields. As of the second quarter, single-tenant industrial net lease cap rates averaged 7.25 percent, according to a Boulder Group Q2 net lease market report<\/a>.<\/p>\n\n\n\n

Essential and mission-critical retail offers somewhat lower yields but still provides stability supported by resilient tenant demand and recurring consumer needs. As of Q2, single-tenant net lease retail cap rates averaged 6.60 percent, reported the Boulder Group.<\/p>\n\n\n\n

Beyond the yield<\/h2>\n\n\n\n

But yield should not be the only measure when considering a net lease investment, sources say. <\/p>\n\n\n\n

\u201cOur approach is to prioritize defensive net-lease structures with investment-grade tenants, essential uses and durable locations rather than reaching for yield,\u201d Stender said.<\/p>\n\n\n\n

Jonathan Hipp, a principal at Avison Young who heads the net lease practice, said focusing on yield first and the real estate second is the biggest mistake investors make.<\/p>\n\n\n\n

“A 7 cap rate isn’t necessarily better than a 5 cap rate if the 7 cap rate has a mediocre location and a weak residual value,\u201d Hipp suggested.<\/p>\n\n\n\n

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CPE Capital Markets Newsletter<\/h2>\n\n\n\n

Executive Editor Therese Fitzgerald delivers the capital markets intel that moves the needle.<\/p>\n<\/div><\/div>\n<\/div><\/div>\n\n\n\n

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