The Value of Single Tenant Net Lease in an Inflationary Environment

In today’s inflationary environment and amidst rising interest rates, single tenant net lease (STNL) assets offer real estate investors potential stability and value. Michael Packman highlights why these assets, especially those backed by nationally recognized credit tenants, may be a smart diversification strategy for 1031 Exchange investors.

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For the full article by Michael Packman, read more in New York Estate Journal.

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Why Net Lease Assets Shine in Tough Economic Conditions

• Inflation Resilience: Unlike multifamily assets with rising operating costs, net lease tenants typically bear those expenses, ensuring stable cash flow for investors.

• Long-Term Stability: Corporate-backed leases with credit tenants provide predictable rent payments and the potential to renegotiate leases at higher rates when terms expire.

• Diversification Benefits: As multifamily assets dominate 44% of DST equity, non-retail net lease assets offer a unique opportunity to diversify exchange portfolios.

Trends in Net Lease Investments

• Shifting Acquisition Strategies: Rising borrowing costs prompted a pivot from retail portfolios to high-credit, non-retail assets such as FedEx distribution facilities.

• Cap Rate Adjustments: Industrial, retail, and office cap rates all rose in 2022, reflecting higher borrowing costs and reduced deal volume.

Navigating the Market

With deal volume slowing and exchange equity taking longer to deploy, investors now have more time to evaluate and diversify their portfolios. Net lease assets remain a compelling option, combining stability with the potential for growth, even in challenging economic times.

02/28/2023