Lease Market On Demand

NNN Lease Market News


The NNN Lease Market on Demand. It looks like another banner year for the NNN leasing market, with demand far exceeding supply in most areas of the country. Thanks largely to the baby boomer population seeking out new types of retirement investments, NNN Lease demand continues to be high, and the demand, for the most part, comes from people who are in the midst of 1031 tax deferred exchanges. And even in light of interest rates trending upwards, cap rates tend to remain low with prices holding steady. Shopping Center Business recently spoke with several companies that are active in the NNN Lease market to find out more about these trends and what we can expect for 2012.
Demographic Shift
The main reason for the current state of the NNN Lease market is the significant demographic shift of baby boomers moving into their retirement years. According to Bruce McDonald, president of Net Lease Capital Advisors, there are about 75 million baby boomers, the oldest of which are just hitting the age of 60, so there are a lot of older Americans who have built up substantial wealth in real estate portfolios. Their ability to go into the net lease market allows them to avoid paying capital gains tax and move from management-intensive real estate to passive real estate that provides a stable income. “There are a lot of people who have built their portfolios out of single-family, duplexes or triplexes, and they are getting too old to bother with that and now have a yin for a management-free investment that produces a regular cash flow,” says Ralph Bunje, president of Reverse Exchange Services, Inc. “The traditional NNN Lease market model for these investors was a single-tenant property, such as a Burger King or post office because it fit their criteria. Now, as a result of this demographic shift, there has been the creation of the TIC [tenant in common] industry.” In addition to a management-free investment, a lot of these retirees are looking for “safer” investments as opposed to the traditional stock market approach.