While the under $10 million price range of the net lease sector makes up less than one-third of single-tenant net lease investment volume by dollar, it constitutes the largest number of deals by count. In fact, more than 70% of single-tenant net lease transactions were priced less than $10 million last year, says Josh Campbell, senior vice president at Stan Johnson Company, in this exclusive.
On the retail side, which accounted for half of 2019 deals less than $10 million, there is likely to be more interest and competition for these lower priced assets in 2020 and beyond. This is because many of the tenants occupying these properties are considered Internet-resistant.
“Activity is dominated by private buyers and individual investors, and we continue to see a lot of 1031 exchange activity,” Campbell tells GlobeSt.com. “But there are still several REITs and smaller funds playing in this space too, particularly on the industrial side. I think the long-term trends point to tailwinds for the new development or re-development of buildings with smaller footprints, and we should see this across all property types. This will lead to an increase in overall supply of these assets, which obviously bodes well for investors.”
As for what’s in store for 2020, Campbell predicts more national retailers with strong credit will look for properties on frontage lots, parking lots and outparcels in good traffic corridors. Retailers requiring drive-thrus, for example, as well as convenience stores and gas stations, will continue to seek multi-tenant retail properties with large lots that can accommodate additional development.
“Also, we should see continued ‘retailization’ of the medical sector, as healthcare delivery pushes further into convenient locations,” Campbell tells GlobeSt.com. “Whether through outpatient clinic growth from large health systems or the influx of private equity into spaces like plasma infusion clinics, deliveries of smaller-footprint healthcare buildings should continue to accelerate. Finally, industrial assets will continue to remain attractive even at lower price points. The yields are still quite good, and small funds continue to form around smaller industrial assets.”