Robust industrial and retail demand helped propel the U.S. net-lease investment market to continued recovery during the first quarter of this year.
"Driven by its inherent stability and appealing risk-adjusted returns, the net lease sector showed impressive resilience and growth in Q1 2025," said Will Pike, president of industrial & logistics/net lease properties for capital markets at CBRE. “Looking ahead, we expect sustained investor interest in net lease assets, especially within the retail and industrial & logistics spaces, as they navigate potential market uncertainties by favoring lower-risk placements.”
Total net-lease investment volume grew by 9% during the quarter to reach $9.6 billion, and for the year ending Q1 2025, net lease investment volume increased 21% year over year to $44.6 billion, the CBRE report said. The lease structure of net-lease properties typically sees the tenant paying a portion or all of the taxes, insurance fees and maintenance costs on a property, in addition to rent.
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Both office and industrial & logistics assets declined seasonally in net lease investment between the fourth quarter of 2024 and the first quarter of 2025, both categories saw an increase in investments. Retail net-lease investment increased 11% during the quarter to $3.1 billion, while industrial & logistics assets increased 46% from a year ago to reach $4.7 billion, or 49% of total net-lease investment volume for the first quarter. Retail’s increase was 25% from a year ago. Meanwhile, the share of office net lease investment decreased to $1.8 billion, or 19%, compared with 29% last year.
Private investors continued to be the largest net-lease asset buyers during the quarter, chipping in $4.4 billion, a year-over-year increase of 13%. Institutional investors and equity funds contributed $2.5 billion in Q1 2025 net-lease investment, up 17% quarter over quarter and 22% year over year. REIT investment in net-lease properties declined by 16% from a year ago to $529 million.
Meanwhile, cross-border net-lease investment decreased by 8% year over year to $774 million, with international buyers comprising 11.6% of total U.S. net-lease investment volume in Q1 2025, down from 13% in Q4 2024 and 10% in Q1 2024, said CBRE. Total cross-border net-lease investment for the year ending Q1 2025 surged by 94.1% compared to the year ending Q1 2024, with the U.K., Canada, Japan, Singapore, and Spain representing 90% of activity.
The average net-lease cap rate increased by 7 basis points quarter-over-quarter and 48 bps year-over-year to 7% in Q1 2024. The retail sector recorded the largest cap rate increase, rising by 60 bps year over year, while the average for office and industrial assets increased by 43 bps and 14 bps, respectively.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
