Private buyers have been stepping into
net-lease space, a signal that a rush of
new players into commercial real estate
markets isn't showing signs of slowing
Private buyers
move in on net-lease sector
P
rivate investors making a first-time
real estate purchase tend to land on
the net-lease space because it is rel-
atively straightforward and low risk.
Net-lease properties are rented to a single
tenant that agrees to pay the taxes, insurance
and other costs that a landlord is typically
obligated to pick up.
Private capital captured a record 37.9 per-
cent of the net-lease market in the first half
of 2018, up by 9.4 percentage points since
2015, according to JLL. In 2017, private
investors accounted for 36.4 percent of all
net-lease acquisition volume.
An expanding U.S. economy has boosted
investment allocations to the broader commer-
cial real estate market in recent years. Returns
on real estate are typically higher than other
assets that pay consistent income, like bonds.
"Compared to lower risk-reward yield invest-
ments in bond markets, private investors are
finding stable, long-term income with net-
leased real estate investments in strong locations
with good credit tenants in place," says Eric
Suffoletto of JLL Capital Markets.
One big shift that has opened up the oppor-
tunity for private investors: REITs have gradu-
ally dropped back. REITs focused on net lease,
deterred by cap rate compression and rising
interest rates, accounted for just 14.5 percent of
net-lease deal volume in the first half of 2018,
down from 33 percent in 2015.
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REALASSETS ADVISER
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