2023 Net Lease Rankings Report
Despite inflation and rising rates, the latest trends in consumer spending indicate a strong preference for single-tenant assets. Notably, Americans’ income and spending both increased in 2023, indicating economic resilience in the face of rising prices and persistent Fed rate hikes. Although this heightened spending has led to increased consumer debt, the labor market has remained resilient due to above-average job creation, resulting in stable low unemployment rates.
Like other asset classes, investment volumes in triple-net lease properties dropped significantly at the end of last year and have persistently decreased in 2023. Sale-leaseback transactions are contributing to the inventory and driving new investment activity. Investors are highly sensitive to yield due to the higher cost of capital, and cap rates have already increased by approximately 75 basis points. The CRE market has been experiencing a standoff between buyers and sellers regarding asset pricing for over a year. Despite expectations that cap rates would rise with increasing interest rates, pricing has not followed this pattern. However, in the last three months, there has been some relief for NNN retail assets as the pricing gap has started to narrow.