Net lease landlords beware. Economic uncertainty, margin pressures, and higher debt costs mean tenant credit bears watching, according to Spenser Allaway, a senior analyst on Green Street's research team and sector head of the Self-Storage and Net Lease sectors.
It is an about face from last year, when credit losses were near historic lows averaging around 75 basis points, compared with the long-term average of 125 basis points, Allaway writes in a recent market brief. "Yet, credit spreads in the bond market suggest above-average credit losses for the year ahead," of around 150 basis points.
To be sure, that is not a huge increase over the average, but it does point to a reversal for the net lease market used to smoother sailing.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
