Prime Net Lease Properties 'Flying' Off Market, Bucking Overall CRE Trends

The best net lease properties are “flying off the market” despite dropping sales volumes for commercial real estate more generally, according to Camille Renshaw of B+E Net Lease.

 Speaking to GlobeSt in advance of this week’s ELITE Women of Influence conference in Lake Tahoe, Renshaw said she’s observed a distinct flight into net lease from other asset classes, in a phenomenon she says underscores the relative strength of the space.

 “When all volume halted in CRE in 2008, we as a segment spiked against that trend,” Renshaw said. “We’ve seen that again here. It’s something that really made an impression on me; net lease functions like a bond does to a volatile stock market.” 

Renshaw said the best properties are trading quickly, especially for price points under $5 million. Cash-flush family offices and private investors still need to trade, making decisions that are tax motivated or involve generational wealth. They want properties that are risk-averse and have characteristics such as long-term leases and strong tenant credit.”

“And it doesn’t matter where interest rates are,” Renshaw said, noting that B+E’s volume is up 25% year over year. “Many investors still need to make buying decisions in today’s market.”

And “right now, if you wanted to place $5 million into something investment grade that has 15 years of term or more, good luck,” she said. “It’s shocking. You’d think there would be assets piling up on the sideline, but it’s not true. We have a supply problem. The demand is there.”

 From a trend perspective, Renshaw is betting big on car washes, noting the current bonus depreciation allows an 80% write-off of the asset in the first year of ownership. (Next year, that figure goes to 60%.)  She says she’s seeing a car wash come to market every day, many of them big brand names backed by private equity dollars or newer concepts with updated facilities.

 So “if a buyer had a big gain or is anticipating a big gain, they’re waiting until later in the tax year to see how much of a writeoff they need and then they’re buying that much car wash,” Renshaw said. “There’s a real opportunity here and there’s going to be a frenzied fistfight in Q4. If you want to close by the end of the year, you need to start looking now.”