Net Lease Investors Come Off the Sidelines and Flock to Sure-Bet Deals

It should come as no surprise that the COVID-19 pandemic sent the investment market reeling. When the full impact of the crisis was setting in back in the first quarter, all sectors of the net lease market felt the dire pinch. Slowly, however, investors seem to be coming out of hiding and creating some activity, as our Q2 Cap Rate Report reveals. Note: We said “some.”

On one hand, overall activity volume is still suffering, to the tune of a 37% drop in Q2, from 416 in the prior quarter to 264 trades. This was on top of the 27% drop the market sustained in Q1. The good news here is that cap rates for the net lease sector overall held surprisingly steady, rising only three basis points on average, this the by-product of the high-quality deals that did get done. In Q2, investors and lenders sought to place money only in the rarified spaces of highest credit and longest leases.