Investors flocked to the single-tenant net lease space en masse in the third quarter, with the sector registering record deal flow despite mounting economic headwinds.

Sales activity for net-leased retail rose between 24% to 27% across the 12-month span ending in June, as record rents approached historic highs and vacancy remained below pre-pandemic numbers, according to Marcus & Millichap data.

"Moving forward, investors seeking long-term cash flow may capitalize on high pricing in other sectors and move equity via 1031 exchanges into less management intensive single-tenant properties," firm analysts note in a new report. "Yield-focused buyers may target Midwest markets with increased frequency, as Detroit, Chicago, Kansas City, Cleveland, Indianapolis, Milwaukee and Minneapolis are home to average returns 30 basis points to 80 basis points above the national mean."