Marcus & Millichap

Single-Tenant Net Lease

Second Half 2019

Special Research Report

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Single-Tenant Investments Continue to Deliver Stability; Retailers Tame Expansion Plans as They Monitor Economic Outlook

Yield spreads benefiting from economic headwinds. The stability of single-tenant net-lease retail continues to attract investors, with an increasing number of buyers coming from other property types. The 1031-exchange remains a common gateway to the sector as roughly 44 percent of STNL buyers in the past four quarters utilized the tax-deferred exchange. Apartment and retail investors have popularized this acquisition strategy as they seek assets with less downside risk amid increased economic uncertainty and concerns of cycle maturity. Falling interest rates and decreasing Treasurys have provided additional boosts to the sector’s appeal, breathing more life into potential deals that had lost vigor just a few months ago. Investors can now capture higher leveraged returns as the yield spread between the average STNL cap rate and 10-year Treasury widened to 400 basis points at the end of the second quarter.

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