LOS ANGELES—Although the net lease market is expected to see a record-breaking year, it is suffering from a limited product supply, according to Craig Tomlinson, CCIM, and senior director at Stan Johnson Co., who is moderating the Town Hall Power Panel: State of the Industry at the Net Lease West conference in Downtown Los Angeles November 12. Tomlinson notes that the sales volumes this year “will be significantly higher for this year versus last year,” the market faces a limited availability of product to buy.

“The limited supply is by far, from the indications we've seen, the biggest and most important challenge that we are facing,” Tomlinson tells GlobeSt.com. Unfortunately, development remains sluggish, offering little new supply to the market. “You are seeing development, but development in the retail sector is mainly driven by consumer demand and consumer spending, and that hasn't really taken off like the economy would need for the big retailers to start building new buildings. There isn't really a campaign right now for any of the big national brands to build new units. There is some development, but I would call it a modest amount of new supply being added to the market this year as compared to the years prior to 2009.”

The industrial and office sectors are seeing slightly more development the single-tenant retail spaces, due mainly to job growth and new branches that require new facilities. “We see as much growth in new product coming on from a dollar volume in industrial and office as we do in retail,” says Tomlinson. “We are definitely seeing new builds occur in that product type, but creation of new supply is not a hot indicator right now.”

Due to the limited supply, some brokers are finding opportunities elsewhere. “A lot of people are looking for sale-lease back deals with existing companies that have existing retail units, industrial units or office buildings,” Tomlinson explains. “They are kind of creating their own supply, if you will, from assets that exist but are user owned.”