U.S. Single-Tenant Net-Leased Retail National Report
Resilient Retailers Set to Overcome Potential Hurdles;
Rising Interest Rates Could Put Pressure on Yields
Net-leased sector faces mix of tailwinds and headwinds. Reopened stores and robust consumption bode well for single-tenant retailers this year, although some challenges remain. A shortage of supplies coming in at higher prices may erode consumer demand as 2022 progresses and the possibility of future virus variants could reintroduce some pandemic shopping behavior. The impact would vary by retailer. Auto parts vendors are benefiting from a widespread shift to longer vehicle ownership, a structural trend that was exacerbated by pandemic-driven shortages of new cars. Fast food restaurants have generally recovered in-house dining but could leverage drive-thru options again if needed. Chains such as Wendy’s and Jack-in-the-Box are resuming new store openings this year. These and other fast casual dining restaurants nevertheless face a persistent labor shortage, including Denny’s, which lacks the workforce necessary to sustain its staple 24/7 level of service in many locations. Overall though, the single-tenant, net-leased sector is poised to report improving property fundamentals this year. Construction remains restrained, while more companies are resuming expansion plans, backfilling spaces and supporting accelerating asking rent growth.