What Does the Future Hold for Net Lease Retail?

TULSA, OK—“Since the recession, we have experienced approximately four years of growth and increasing stability in the net lease space.” That is according to Brad Pepin, senior director of Stan Johnson Co. We asked Pepin, along with two other Stan Johnson executives, about the current state of the net lease retail market, and where is headed in the next few years.

The growth Pepin spoke of has been “driven by increased supply—retailers are growing their footprint, thus causing more development activity—as well as historically low interest rates, and pent-up demand by REITS, pension funds, private equity groups, and individual investors.”

According to Pepin, “Unless there's a significant change in the financial markets or material increases to interest rates, we expect cap rates to stay at similar levels we're experiencing today. The net lease market is robust and healthy, which is very good for our developers and institutional sellers.”

Tulsa, OK-based Ken Hedrick, senior director at the firm agrees that the future of net lease retail assets remains strong. “New build-to-suit activity is continuing to pick up pace and that will help with the lack of supply," he says. “We also continue to see shorter term retail properties in good locations with strong demographics trading today.”

For the Midwest specifically, Brandon Duff, regional director in the firm's Chicago office, says that the net lease retail market is strong in the Midwest, especially in the major metropolitan areas. “There continues to be a large amount of both local capital and out-of-state capital flowing into the region,” Duff tells GlobeSt.com. “There are numerous new developments and several new tenant expansions taking place such as Fresh Thyme Farmer's Market, ALDI, Sleepy's, and a still continued push from Mariano's Fresh Market (Roundy's) and a variety of others.”