Net Lease the Fifth Major Commercial Real Estate Type?
I read an interesting article in Globest.com this week talking about how demand for single tenant net lease properties is likely to remain high. That point is nothing new to those who’ve been watching net lease recently.
However, what caught my eye was a provocative quote by a STNL expert, Sam Alison of Stan Johnson Company. Mr. Alison asserts that net lease is “now one of the five major commercial real estate types, along with apartments, office, industrial, and retail.” It is an interesting thought.
Check out our single tenant net lease valuation model in Excel
Corporate sale leasebacks are a popular form of single tenant net lease.
What Makes STNL Popular
Characteristics unique to net lease properties such as consistent, predictable cash flows, very long lease terms, institutional credit rated tenants, and easy management have attracted institutional players who once shied away from net lease properties.
As a result, sales of net lease retail properties have nearly tripled to $70 billion in the 12-month period ending March 31, 2014 compared to just three years ago. Mr. Alison proffers that this meteoric increase in interest for net lease warrants an elevated status.
But is high demand for a product type sufficient to elevate it to the same status as the majors (office, industrial, apartment, and multi-tenant retail)? Maybe. But if that is the case, shouldn’t hotel than also be considered a major commercial real estate type?
Frequently Asked Questions about Single Tenant Net Lease (STNL) as a Major CRE Type
What is Single Tenant Net Lease (STNL)?
STNL refers to a property leased to a single tenant under a net lease structure, where the tenant is responsible for some or all of the property expenses (e.g., taxes, insurance, maintenance), in addition to rent.
Why is STNL gaining popularity among investors?
STNL properties offer consistent, predictable cash flows, very long lease terms, institutional-grade tenants, and low management burden, making them attractive to institutional investors seeking stability.
How much have STNL retail sales grown recently?
Sales of net lease retail properties nearly tripled, reaching $70 billion in the 12-month period ending March 31, 2014, compared to just three years earlier.
What argument does Sam Alison make about STNL?
Sam Alison of Stan Johnson Company asserts that net lease is now one of the five major commercial real estate types, joining apartments, office, industrial, and retail.
Is market demand alone enough to elevate STNL to a major CRE type?
The article questions this idea, noting that high demand alone may not justify categorizing STNL as a core property type. If that were the sole criterion, hotels—also experiencing institutional interest—might qualify as well.
What are corporate sale leasebacks and how do they relate to STNL?
Corporate sale leasebacks are a common form of STNL, where a company sells a property it owns and simultaneously leases it back from the buyer, ensuring continuity of use and freeing up capital.
Where can I find tools to evaluate STNL investments?
You can explore the single tenant net lease valuation model in Excel provided by the blog post’s authors to assist with investment analysis.
