Headwinds are mounting for the single-tenant net lease sector after a strong first half of 2022.

The STNL space saw a record $40.1 billion in investment sales in H1 2022, 12% above the same period in 2021 (also a previous record) — but research from Colliers shows that the pace of sales is slowing, with volume in the second quarter falling 35% from Q1 and 17% year-over-year. Deal count was also down 42% year-over-year in the second quarter.

"Rising interest rates have made transactions more challenging to complete, particularly for the private owner reliant on debt," the Colliers report notes. "Predictable cash flow has been critical in the STNL space. While that is still the case, modest rent increases built into lease structures are less appealing to today's investors, thanks to stubborn inflation. Likewise, the cost of debt has increased, so non-cash buyers are asking for price discounts that some owners are unwilling to accept. This dynamic has caused the market to show signs of peaking."