Single-Tenant Retail is a Hot Investment Market

Author

Ken Wimberly

Single-tenant retail is one of the hottest subsectors of the retail investment market, according to the >experts.

Speaking to commercial real estate source GlobeSt.com, Faris Lee Investments Director Nicholas Coo argued that some segments are experiencing pricing highs, while others are in equilibrium. “The seller’s market is at its strongest in the single-tenant category, largely within the ultra-urban core MSAs and also across the country for NNN assets with credit tenants.” Outside of urban-core markets, there is more equilibrium between the buyer’s and seller’s markets.

Coo also notes that, currently, the two most sought-after property types are:

1. New properties with solid tenants (sought after by security-driven buyers),

and

2. Value-add properties (such as a property with a vacancy, or one with a difficult configuration and low rental rates), which present an opportunity for buyers.

What is a Single-Tenant Property?

A single-tenant property is a commercial property occupied by a single tenant. These are typically standalone retail stores, such as drugstores, pharmacies, grocers, fast food restaurants, and other types of retailers. Single-tenant properties are usually operated under a triple-net (NNN) lease agreement, under which the tenant is responsible for all major expenses related to the property, including property taxes, maintenance fees, and insurance.

Why Invest in a NNN Property?

Single-tenant properties are a boon to investors because of the low management and low risk required. Also, single-tenant properties with triple-net leases have a great track record. Single-tenant properties continued to do well throughout the recent recession. Now, they offer higher returns for investors and trade at higher CAP rates than multi-tenant properties. When an investor finds a triple-net property with long-term, creditworthy tenants, it’s a win-win situation for both parties. Tenants benefit from low rent and management, while triple-net investors make a safe investment that potentially generates long-term income.

Adding a Net Lease Investment to Your Portfolio

Adding an NNN or NN property to your investment portfolio is a sound decision that allows you to easily reap financial gains. The team at Wimberly Group Real Estate Advisors helps commercial investors find new and value-add properties to add to their portfolios. Additionally, we broker net lease transactions between buyers and sellers for maximum satisfaction. There are a number of single-tenant properties in our listings, and we’re happy to provide as much information as possible to help you make your investment decision, including skilled valuations and market comparables.

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