Triple-net leases are shedding their reputation as a sleepy, bond-like corner of commercial real estate and morphing into a more complex vehicle where lease terms, tenant mix and credit risk are all in flux, according to Dan Spiegel, senior vice president and managing director at Coldwell Banker Commercial.
Longer, flat leases with blue-chip drugstores and big-box retailers are giving way to shorter terms with built-in escalations and a broader universe of tenants, from outpatient medical clinics to last-mile industrial users, forcing investors to rethink how they underwrite risk and reward in a post-Walgreens, post-Bed Bath & Beyond market.
Lease terms lose their "set and forget" profile
For years, much of the appeal of net lease investing lay in its predictability: 10 to 15-year terms with corporate-backed tenants and little to no rent growth, which produced a bond-like income stream for owners. Those structures often featured flat rents or minimal bumps every five years, a profile that worked for tenants seeking certainty and investors willing to trade upside for stability.
That model is changing as inflation and interest rate volatility work their way through the market. Spiegel notes that more net leases now include regular escalations that look closer to traditional office or multi-tenant retail deals, intended to offset operating cost increases over time and reduce the risk of rents drifting below market.
"What is starting to change is you're starting to see more escalations in the lease," he says, adding that the shift is driven in part by the recent period of higher inflation and the abrupt end to a decade of rate predictability.
For investors, those escalations can enhance returns but also require more nuanced modeling of cash flow and cap rate movements over the hold period. The "coupon" is no longer fixed in the same way, and the assumption that income will remain perfectly in sync with long-term debt costs is now more difficult to make.
Risk moves toward the tenant side of the table
Alongside structural changes, Spiegel sees a rebalancing of who ultimately absorbs the financial and operational risk in net-lease deals. Traditional NNN structures already pushed taxes, insurance and maintenance to the tenant, but in a rising-cost environment, owners are looking for additional protections, from stronger pass-throughs to escalation formulas that keep operating margins from eroding.
"The risk reward is putting a little bit more of the financial onus onto the tenant, as opposed to the landlord," Spiegel says.
That shift reflects not just inflation but also a recognition that even marquee names can stumble. Walgreens and CVS, long viewed as the archetypal net lease occupants, have both faced business challenges in the post-Covid era, and Walgreens' plan to close roughly 1,200 stores underscored that corporate guarantees and investment-grade ratings are not fail-safes.
As a result, investors can no longer treat tenant credit as a box-checking exercise tied primarily to national brands and ratings. Lease negotiations increasingly focus on how risk is shared over time—who pays for capital-intensive improvements, how quickly rents reset, and what protections exist if store-level performance deteriorates. The simplicity that once defined the product is giving way to bespoke structures that require closer scrutiny.
Rethinking credit after Walgreens and Bed Bath & Beyond
The high-profile distress of chains like Bed Bath & Beyond, alongside retrenchment in the drugstore sector, has prompted investors to broaden their definition of what "good credit" means in a net lease deal. Spiegel says those events have "put more light on" the need for a different balance in the risk-reward equation and have prompted a search for tenants whose business models are less exposed to e-commerce and discretionary spending cycles.
That search is drawing capital toward what he describes as "mid-tail" uses, especially health care-related operators. Outpatient medical clinics, including freestanding dialysis centers, are emerging as particularly attractive because of demographic demand and the heavier interior buildouts they require, which can anchor tenants in place.
"If you build out the build out required, let's say at a medical office, [it] is a little bit more substantial," Spiegel notes, adding that when tenants contribute to that investment, they are more inclined to stay longer to recoup the cost.
Industrial, especially smaller single-tenant or small multi-tenant buildings tied to last-mile distribution, is seeing similar interest. The sector's post-Covid momentum and mission-critical role in e-commerce logistics give investors a different type of credit story than traditional retail boxes, with risk tied more to location and supply-chain relevance than in-store sales. In both cases, investors are moving beyond the idea that national retail banners automatically equate to superior credit and are instead parsing business models, use types and stickiness of occupancy.
From QSR strips to medical and industrial boxes
Perhaps the most visible sign of this evolution is the changing face of the typical net-lease property. Spiegel says he still thinks of net lease assets as freestanding, often single-tenant buildings, historically dominated by quick-service restaurants and drugstores. But over the last several years, a broader range of users has begun to occupy that same physical format, effectively blurring the old line between "retail" and other asset classes.
"What would have been a former office user [is] now thought of as a net lease retail tenant such as a freestanding DaVita dialysis center," he says, noting that he would not have framed that type of facility as a net lease investment opportunity in the past. Today, such medical users are "almost desirable" net lease tenants because of demographic tailwinds and the capital they deploy into their spaces.
Industrial users are following a comparable path, particularly in smaller last-mile facilities that function more like high-throughput retail infrastructure than traditional warehouses. These assets still fit the single-tenant, freestanding mold that net lease investors know well, but the revenue drivers behind the rent checks differ and underwriting now leans on logistics fundamentals as much as consumer traffic.
"It's taken some attention away from sort of the traditional retail base of net lease investments," Spiegel says.
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