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Flight to Quality Now Boarding

David Sobelman: Defining quality in a net lease investment depends on who's buying.

By David Sobelman | Updated on July 05, 2009

I first heard the phrase “flight to quality” during my first job in commercial real estate. I was a research analyst sitting in a cubicle, staring at my computer screen and wondering why there was over 500,000 square feet of negative absorption of office space in Washington, DC–in one quarter.

The year was 2002. That was quite a rude awakening for not only me, but every landlord in our nation’s capital. What do you do with all that vacant space in such a short period? The answer: Lower your rental rate. Tenants began filling vacancies and getting better office space. It was a flight to quality.

But net lease investments are different when considering quality, which is a popular word these days. In the net lease investment industry, we’re typically not discussing the leasing of a single-tenant office building, a large warehouse or a small retail center. We’re discussing investments–the purchasing of assets for an immediate return.

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