What is Net Lease Investing? An Introduction to the Growing Market

What Is Net Lease Investing? An Introduction To The Growing Market

As commercial real estate investors expand beyond traditional property types, such as apartments, offices, industrial, and retail, they are turning to the growing market of single tenant net lease investing. With over $60 billion in annual transactions, net lease investment sales are on the rise across the country. But what is net lease?

Net lease is a unique category within real estate where properties typically feature a long-term triple net (NNN) lease. In a NNN lease, the tenant pays for rent, insurance, utilities, and maintenance costs, with the landlord responsible for covering any debt service if there is a loan on the property. This lease structure is standard practice for corporations such as Chic-fil-A, 7-Eleven, Walgreens, Home Depot, Fedex, Amazon, etc. If you’re interested in net lease investing, contact us to connect with an experienced broker.

Why is credit important for net lease investing?

When it comes to net lease investing, the credit of the tenant and the length of the lease are the key drivers of pricing and value. Highly rated tenants like McDonald’s, Starbucks, and FedEx command premium prices, and longer term leases of 15+ years are more desirable than those with shorter terms. Net lease assets span a range of property types, including industrial, office, retail, restaurants, and government facilities, with price points starting at less than $1 million.

What are the advantages of net lease investing?

One of the most significant advantages of net lease investing is its passive nature. The tenant is responsible for day-to-day maintenance and upkeep, and fixed-rate, long-term leases with rent escalations over time provide steady, predictable income. Net lease investments are also considered low-risk due to the long-term lease agreements, with investors able to adjust risk-adjusted returns by taking on more or less risk with different tenant credit ratings and lease terms. Finally, net lease investors enjoy the same tax benefits as other commercial real estate investors, including depreciation and a step-up in basis when passing assets on to heirs.

If you’re interested in learning more about net lease investing, use the form below to contact our experienced brokers for guidance and support through the whole process. Want to be among the first to receive newly released market data and listings? Subscribe to B+E’s updates here.