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Net Leases in the Wake of Recession

For investors with a preference for relatively safe and profitable long-term investments, direct investment in real estate presents itself as the best option.

By Jonathan Hipp | Updated on February 01, 2012

Even though triple net leases and direct investments in real estate, as well as REITs, were affected by the 2007 recession, REITs and corporate stocks took a much bigger hit while having generated less return in the years prior to the economic downturn. The U.S. economy is still recovering from the recession and will most likely remain in this state for another year or so, while cap rates are expected to rise and revert to their healthy and sustainable median values.

Researchers agree that the recent recession was caused by “the collapse of the housing market and the resulting sub-prime mortgage crisis that led to bank failures in the US and Europe.” Businesses had a difficult time obtaining credit for real estate acquisitions, refinancing, or new developments. Record high oil prices are also quoted as a reason for the worldwide economic downturn. The impact of this international recession could be seen in the stock-, as well as the real estate markets. As the liquidity crisis forced many businesses to sell part of their real estate portfolios, the situation worsened due to the already saturated real estate market being flooded with many more properties that had to be foreclosed or sold at sometimes half their prior values.

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