Despite National Uncertainty, Net Lease Stays Hot
Even though commercial real estate may be at or past the peak of this real estate cycle doesn’t mean the market will slow down anytime soon, says Ben Prater in this EXCLUSIVE.
SACRAMENTO—When contemplating a move to Stan Johnson Company, Ben Prater noted the company’s net-lease specialization as an important factor. Prater ultimately decided to take the leap and recently joined the firm as associate director.
In this exclusive, Prater shared some insights into investor interest in Sacramento net-lease properties, which properties are most popular and what the future holds for this property type.
GlobeSt.com: How would you describe investor interest in Sacramento net-lease properties/? How has it changed in the past 18 months?
Prater: I see net lease investor interest in Sacramento mirroring that of the national net-lease sector. It is strong and we are seeing demand across all product types. I think the past 18 months have brought a bit of uncertainty from several different directions though: fed rate decisions, cap rate suppression and stock market turmoil. But at the end of the day, net-lease properties remain in demand. Investors are looking for security and want to have a feeling of control. Even though we might be at or past the peak of this real estate cycle, this doesn’t mean the market will slow down anytime soon.
GlobeSt.com: What Sacramento net-lease product types are seeing the most investor interest? Why?
Prater: The industrial sector has seen the most activity during the last few years, and while not all the product classifies as net lease, a good portion of it certainly does and demand is very strong. Secondarily, I think the corporate-leased well-located retail product always sees strong demand, such as coffee chains, fast casual dining and quick service fast food. These properties often have the best locations and the longest-term leases, which are enticing characteristics to most net-lease investors.
GlobeSt.com: How has the investor profile in Sacramento net-lease properties changed in the past 18 months?
Prater: I think the biggest change has come from large institutional investors entering our market. Sacramento is considered a secondary market and is the little brother to the Bay Area; institutions are chasing better yields by entering our market. We offer strong employment, access to an educated workforce and our location is second to none. Aside from large institutions, Sacramento has always had a long history with the private capital investor, whether that be an individual, a family or a privately held real estate company. And that investor profile remains strong in Sacramento while consistently growing.
GlobeSt.com: What does the future hold for the Sacramento net-lease market?
Prater: I feel the future for Sacramento’s net-lease market is going to remain strong for the foreseeable future. Because we offer a lower cost of living and a better quality of life than some cities or regions, we are seeing population growth translate to increased development. Sacramento will always have a bright future in my opinion, since we’re the capital of California, we have a large and educated population, and we remain affordable in comparison to the Bay Area or Los Angeles. We also don’t have a lack of developable land, which makes future retail development easy and future industrial development possible.
Prater began his career in commercial real estate at Grubb & Ellis. He then moved to Colliers International where he was an investment advisor for 11 years. Most recently, Prater was a vice president at CK Capital Commercial, an investment and equity firm.