LOS ANGELES—A limited product supply is among the top challengesin the net lease market, but for portfoliomanagers, a limited supply has some benefits, according toMark Selman, SVP of asset management atAmerican Realty Capital Properties. Selman isspeaking on the asset and portfolio management panel at theNet Lease Westconference tomorrow in Downtown Los Angeles.

“The limited supply in some ways is an advantage to us becauseit gives us an opportunity to recycle our portfolio,” Selman tellsGlobeSt.com. “A portfolio is sort of a living, breathing item, andbecause industries and geographies change, we have to go throughand rebalance our portfolio to make sure that industry metrics arestrong, to help with the equity raise and to deal withunanticipated challenges, like changes in industries, changes intenant credit, changes in tenant format and so on.”

The limited supply is being driven by demand from net-leaseREITs, according to Selman, although some experts explain thatREITs have been priced out of the market due to decreasing cap rates.Still, Selman explains, there are more net-lease REITs today thanthere were two years ago, and those REITs need to maintain aminimum size to remain competitive in terms of cost of capital.“Competition is at an all-time high for new industry assets, andpeople want larger transactions,” Selman adds.