Single-Tenant Net-Leased Retail Midyear Outlook
Low Bond Yields and Elevated Inflation Risk Invigorate Buyer Interest in Net-Leased Assets
Demand for single-tenant properties to last beyond health crisis. Most of the traditional users of net-leased retail space weathered the pandemic better than many sectors of the real estate market. Nonetheless, vacancy increased as occupancy restrictions and full shutdowns were too much for many concepts to bear. Vacancy in the single-tenant space increased 50 basis points to 5.3 percent between the first quarters of 2020 and 2021. By comparison, multi-tenant retail vacancy jumped 80 basis points to 6.6 percent during the same span. Going forward, vacancy will continue to climb modestly, though most of the rise will be concentrated in dilapidated space or nearby multi-tenant centers that have lost the anchors critical to remaining relevant. Tenants on pads near defunct malls, in particular, will be challenged to survive or forced to relocate.