Stan Johnson Exec: Last 12 Months in Net Lease Have Been "Fascinating"

Lanie Beck

GlobeSt.com caught up with Lanie Beck, director of Research and Communications for Stan Johnson Co., to discuss the latest happenings in net lease from her perspective. She touched on a wide range of areas from emerging trends to what is happening in retail. Following are excerpts.

What surprised you about the Q3 numbers?

Surprised might not be the right word, but the last 12 months have certainly been fascinating to watch. Starting in Q4 2018, the single-tenant net lease market has reported more than $20 billion in investment sales in three of the last four quarters, breaking all kinds of records. And there’s no indication that momentum will slow in the final quarter of 2019 either. We’re realistically looking at our first year of seeing the STNL market surpass $70 billion in annual sales.

What emerging trends are you tracking in the national net lease market?

Recently, we’ve seen some investors shift their focus to include property types and uses that historically would not have been considered core net lease investments. In addition to the more traditional free-standing retail assets that still trade frequently, investors today are interested in healthcare properties, distribution facilities, and single-occupant office buildings. Watch for interest in these sectors to continue growing in the near-term.

What is your overall outlook for the 2020 national net lease market?

Rarely do market conditions change drastically overnight, so my overall outlook for next year is positive. Pending a significant economic event, I’m not predicting a considerable drop off in activity in 2020, although I don’t believe we can sustain the current pace for too much longer. We’ll likely see quarterly investment activity fall closer to average for a non-recessionary market. However, the political environment will be volatile next year, and experts continue suggesting a market correction, if not a recession, could be coming in the next year or two. So, depending on the speed of its arrival, we may or may not have time to see another few quarters of robust activity.

What net lease property types will see the biggest change in 2020?

The story continues to be retail. Retailers are seeing their environment shift the most, as they’re being forced to rebrand, refresh, and sometimes completely reinvent themselves in order to remain relevant with consumers. And those brands that are unable or unwilling to embrace the change are being phased out or forced out. Consumers are dictating the new rules of retail, and they want convenience and value above all else. And with traditional retail centers being built for convenience and access, we’re seeing non-retail tenants continue taking advantage of vacancies. Medical tenants are moving into strip centers. Libraries and police stations are now occupying vacant anchor stores. Even multi-family developers are looking at repurposing unused regional mall space, leveraging the retailers as “on-site amenities.” 2020 will undoubtedly provide more of these creative stories.