Net Lease Demand Likely to Stay High
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LOS ANGELES—“Net lease is now one of the five major commercial real estate types, along with apartments, office, industrial, and retail.” So says Sam Alison, west region director, based in the firm’s L.A. office. He tells GlobeSt.com that sales of net lease retail properties exceeded $70 billion during the 12-month period ending March 31, 2014, a compounded annual growth rate of 65% over a three-year period.
“Net lease properties have characteristics like liquidity, depreciation, and management ease that attract private and institutional investors,” Alison explains. “As the population matures, it is likely that demand will stay high.
When asked whether buyers or sellers hold the upper hand with net lease retail properties, Alison points out that the amount of investment capital available to acquire net lease properties is over four times greater than the available supply. “This imbalance gives sellers more say in setting price and terms; but, the balance is not completely one-sided.”
According to Alison, “Sellers need buyers to transact in order to generate capital for development, distribution, or acquisition. Generally speaking, there is unlimited investment capital available to acquire the perfect net lease deal; however, there are few perfect deals.”
Buyers, Alison says, gain more control as a deal moves further out on the risk spectrum based on tenant credit, remaining lease term, market conditions, and property location. “Brokers are the guiding hand to help buyers determine their needs, establish an appropriate risk-adjusted return, and find the right property; and, help sellers find, screen, and close the best buyer based on price, timing, and certainty. Everyone can be a winner in this market.”
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