Net Lease: New Horizons For Net Lease

Every net lease landlord dreads the call. The one where the tenant, say a retailer, informs the landlord that Amazon is killing it and it will need a 25% rent reduction. And just like that, the landlord comes face to face with the reality that net lease is not that fabled asset class where all you have to do is sit back and wait for the rent checks to come rolling in. “Those landlords, who thought this was a passive investment for 15 years, aren’t prepared to make a decision on something presented by the corporate tenant,” says Noah Shaffer, senior director of asset management for Confidant Asset Management.

In some cases, retailers aren’t even offering to negotiate with their landlords. They’re just closing up shop.

“Retailers are failing,” Shaffer says. “This is a real threat to net lease landlords. Not only will landlords lose the rental income, but they will also have to service the property tax, utilities and insurance for the site. Strong retailers are using this dialogue to leverage and scare net lease landlords into rent reductions.”