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, the category surged by 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, and 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 12 months through Q1 2024, with the U.K., Canada, Japan, Singapore, and Spain representing 90% of activity.
The average net-lease cap rate increased by seven 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.
