August 6, 2020: By Andrew Ackerman – The triple net investment market has seen a two-fold shift amidst the COVID-19 pandemic. In late March, we saw a pause as investors took time to digest rapid changes in the global economy before making forward-thinking investment decisions. However, on the other hand, demand for NNN assets has been steady despite economic turmoil.
Real estate is a valuable asset in times of economic uncertainty, and investors look to net lease as a hedge against the volatility of the stock market. Since the federal reserve has taken actionable steps toward keeping the economy moving forward as well, we haven’t seen a significant change in cap rates or NNN demand, which we anticipate to continue in coming months.
Since March, we’ve seen investors turn to fundamental real estate principles. They’re taking on more traditional financing options like bank loans, exploring life insurance lenders, and turning away from CMBS loans.
While some sectors have suffered from the economic climate, such as restaurants and hospitality, we’re seeing them turn to creative solutions like restructuring on the tenant side. The entrepreneurial skills of restaurant and hospitality owners in this time has encouraged restructures, pivots and internal changes that set them up for long-term success and stability in the future.
Many essential businesses that have not shut down— including convenience stores, pharmacies, grocery stores and medical offices—are also seeing increased consumer demand during this time and have proven their resiliency as a stable investment during current circumstances. Brick and mortar locations have proven to be a necessary pillar in providing essential goods and services for consumers. These businesses are stable during typical times, but as demand has increased, they’ve maintained and solidified their stability.
We don’t anticipate COVID-19 introducing any major paradigm shifts in triple net investments; at the end of the day, the fundamentals of real estate are still most important as investors examine their assets and capital—while companies with stable balance sheets will continue to survive and thrive, investors are taking a closer look at their physical real estate assets to understand their value. However, we’re seeing faster changes in business models as retailers move online, physical locations build out drive-through options and big-box properties shift to fulfillment centers and multi-purpose spaces. These changes were already happening, but the need for change has accelerated.
During this time, Sands Investment Group has positioned itself on the side of problem solving in helping our clients’ businesses thrive and grow. We’ll see steady demand and investors looking for a new home for the capital they’ve held onto during the second quarter. The NNN asset class is resilient and we expect a strong, potentially record-breaking second half of the year for SIG and net lease in general.
Andrew Ackerman is a Net lease Advisor with Sands Investment Group and is the Managing Director of their Atlanta, Georgia office.
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.