July 31, 2019 – By Kaveh Ebrahimi: Midway through 2019, we’re continuing to see investors embrace the advantages of low-risk NNN properties by shifting their investments away from higher maintenance property types. The market is rich in triple net opportunities, and a number of key product types are driving the stabilization of the market and increasing inventory levels at the same time.
In the medical office space there is a focus on new development and construction, and as a result, this sector is expanding aggressively. Urgent care clinics, surgery centers, and other specialized practices are starting to move away from sharing or leasing space from hospitals. Instead, physicians and specialists are partnering up and opening their own practices or buying or renting space in shared medical office buildings where there is good traffic and neighboring tenants.
Another trend that is continuing with momentum is 1031 Exchange capital being used to purchase low-risk, low-maintenance triple net leased properties. Investors are selling management-intensive properties like apartment complexes to invest in NNN properties, increasing their returns (without having to perform landlord duties) thanks to the strong, stable cap rates driving the NNN market.
Despite news of big box brands downsizing their retail locations, the NNN retail market remains strong and stable, particularly in the restaurant and medical sectors. Rates are stable, therefore, the NNN market continues to hold its values. Markets like, Texas, Tennessee, Colorado, and Florida are particularly strong at the moment, but overall, there is a lot of revitalization going on across many markets—which is good to see.
As part of this revitalization, we’re seeing that existing shopping centers are turning into lifestyle centers. People are gravitating to the concept of creating and living within their own micro community; with living and office space on the second floor and above, and coffee shops, restaurants, grocery stores, gyms, service-oriented businesses, and more on the ground floor.
NNN inventory has been robust. Due to an influx of available properties, buyers have more options. In the current market, buyers can be more selective, which gives them more leverage in the market and the option to choose the best fit for their investment portfolio.
Kaveh Ebrahimi is a net lease advisor at Sands Investment Group, based in the Santa Monica, CA office.
This post was originally published in: National Real Estate Investor (NREI)
Sands Investment Group (SIG) is a commercial real estate brokerage firm that specializes in the buying and selling of net lease properties for private investors and institutions across the United States. Our industry knowledge, experience and vast network of buyers and investors are integral in our client-forward strategies.