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Each quarter, the Boulder Group puts out a report about transaction volumes and property values in the net lease sector. With COVID-19 pandemic shutting down many retailers, there's little doubt the second-quarter numbers won't look very similar to what happened at the beginning of the year.

Right now, Randy Blankstein, president of the Boulder Group, thinks transaction volume is down at least 20% to 30% in net lease, judging by the number by the number of properties on the market.

"Clearly, it [transaction volume] is off," Blankstein says. "The question is by how much. The longer this goes on, the worse that number gets. Maybe a 20% to 30% decline is the best-case scenario for major block transaction volume. This is the price discovery quarter and a wait-and-see quarter. A lot of people are frozen on the sidelines."

Cap rates are harder to predict. "It's not a true number [for cap rates] when transaction volume goes down a lot because only a few trades of the most motivated people represent the market," Blankstein says.

Right now, the vulture buyers are looking for net lease assets, though they can't find things that meet their criteria. Most landlords in the sector aren't considering those bids, according to Blankstein. "They [the vulture buyers] just can't find things," he says. "People don't like the pricing, and so that's why the transaction volume will be substantially lower this quarter."

One reason, Blankstein doesn't expect pricing to erode is because most net lease landlords don't have to sell.

"The net lease market isn't like the stock market that gets priced immediately," he says. "If you're a seller [in net lease] you can refinance versus taking the bad vulture bid. You can say, 'Look, I'm going to wait and see.'"

Blankstein says most net lease properties are on long-term leases. "If you have ten years left on your lease, you're not under immediate pressure to do anything," Blankstein says.

If the tenant is paying, the length of the lease can also insulate the landlord. "You may have situations where some people aren't paying rent," Blankstein says. "But for the most part, you're getting paid. So you can wait it out a little bit." While vulture investors may be circling the sector, Blankstein doesn't think they'll find a lot of buys in net lease. "I think vultures are better suited for other sectors," he says. "I don't think net lease is really a great place for them."

Those sectors with negative cash flow will get hit especially hard and should be more ripe for vulture buyers. "It [the activity] is going to be in the land space," Blankstein says. "It's going to be in the value-add and bank in that nature. Those are the people that are going to get hurt because they have negative cash flow."