2021 Could Be a Record Year for Net Lease

When Ryan Severino, chief economist at JLL, closed his opening keynote speech at the GlobeSt.com Net Lease conference in Los Angeles this week, he forecasted that net lease investment sales volumes this year would eclipse 2019, the prior peak. Then, he sat down to moderate the State of The Industry: Post-Pandemic Recovery, and the speakers on the panel confirmed it.

The panel included industry leaders Gino Sabatini, managing director and head of investments, W. P. Carey; Chris Capolongo, managing director at Angelo Gordon; Coler Yoakam, senior managing director of corporate finance and net lease platform leader at JLL; and Daniel Taub, SVP and national director of retail and net lease divisions at Marcus & Millichap.

All four panelists were bullish that the 2021 activity would either come close to of exceed 2019 numbers. Capolongo and Sabatini both said they expect to “blow past” the previous record transaction volumes this year, while Taub said that he expects to either match or exceed 2019 at his firm. Yoakam’s practice group at JLL, has already surpassed 2019 activity.

While the panelists were clear that this would be an impressive year for acquisition activity, particularly coming off of the turbulent 2020, they also said that the market is poised for several quarters of growth. “We are coming off of a bottom. We are going to have several quarters of positive growth,” said Capolongo on the panel. He expects to see both rent growth and demand growth. Taub agreed that there is a good runway of growth ahead.

The reason for the massive transaction volume this year? There are a few. Primarily, there is a lot of optimism in the asset class, thanks to rent growth, favorable supply-demand dynamics and ample capital that is looking for a home. Yoakam said that there is “as much transaction velocity” as he has ever seen in the space, but it is going to “intelligent” deals with smart underwriting and no debt-burdened properties. “It all seems very rational.”

Sabatini also said that cheap debt is playing a role in the activity. His firm has secured 2% debt on US deals and sub-2% on deals in Europe. “Capital is readily available at terrific costs, and that is what is driving all of this demand,” he said.

New entry into the market is also driving activity. Capolongo said that there was an institutionalization of the space happening. Taub is also seeing an increase in institutional demand, saying that a lot of institutions have adopted a “net lease investment thesis.” However, he is also seeing strong demand from private clients and small investors.