Real estate has often been described as the third leg of the stool that you should be investing in to maintain a steady, balanced portfolio. Well, investing in a single-tenant net lease (STNL) retail building now is likely to be a less volatile move than in the broader market, according to Marcus & Millichap’s 2019 Net-Lease Retail report.
Here are five reasons why you should consider investing in this bankable type of commercial real estate deal now.
STNL retail continues to be a stable investment, so much so that there is an increasing amount of investors from outside property types getting involved. Oftentimes, the 1031 Exchange has acted as the common gateway into the arena, with about 44 percent of STNL buyers in the past year participating in the tax-deferred strategy.
2. Bond-like Assets
Investors have been looking toward STNL investments with strong credit retail tenants and ideal lease terms especially now as the economic outlook moderates. Considered to be bond-like because they provide more security, investing in STNL promotes steady portfolio performance.
3. Transaction Velocity
The velocity of these types of transactions is also remaining steady as the buyer/seller expectation gap stabilizes. As mentioned, investors across all market types have been showing consistent interest in the retail sector. The decrease in interest rates as well as U.S. Treasury securities have driven further attention to retail investments.
4. Retail Sales Boost
Retailers are noticing a higher level of discretionary income still from their consumers, such as a rise in going out to eat rather than grocery shopping, and they are certainly taking note. Retail sales growth has been strong, with single-tenant retailers as primary drivers of consumption, according to the report.
Lenders are growing their confidence in the long-term outlook in the evolving sector, focusing mainly on tenants with sustainable business models and high credit.
5. Yield Spreads
It has proven to be one of the few asset classes that investors can generate yield without the excessive risk, according to this report. Yield spreads have been healthy due to the current economic headwinds, which can result in a significant amount of cash flow.
Higher leveraged returns are expected from the yield spread between the average retail STNL cap rate and 10-year Treasury widening to 400 basis points.
Due to several current economic factors such as a tight job market contributing to stable retail consumption and lower inflation, now is the ideal time to invest in an income-producing STNL property to add stability to your portfolio.
Check out the available STNL retail opportunities we have currently.
“If you don’t find a way to make money while you sleep, you will work until you die.” — Warren Buffett
This article is intended for informational purposes only and should not be used as a substitute for recommendations or services provided by a licensed professional.