Tariffs, interest rate fluctuations and macroeconomic uncertainties continue to reshape the net lease investment market. As these factors evolve, investors are working to make long-term decisions in an uncertain environment.
“There’s a lot of volatility, especially around tariffs and trade policy,” says Jason Patterson, executive director of investments at W. P. Carey. “It’s difficult for a CFO or CEO to commit to a 20-year lease when so many of these factors are changing day to day.”
This unpredictability has tempered deal volume, but as conditions stabilize, Patterson expects a resurgence in activity later in the year.
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The Impact of Interest Rate Volatility
Interest rates have been a focal point for investors, particularly given their impact on pricing and transaction volumes. While rates have been trending downward recently, the past year has seen continued fluctuations, making it challenging for buyers and sellers to align on pricing expectations.
“Investors really track the 10-year US Treasury as a guidepost for risk and pricing,” Patterson says. “The volatility we’ve seen has widened the bid-ask gap in many cases, making it harder for deals to come together.”
He notes that as interest rates stabilize, market conditions should improve, leading to increased deal flow.
Sale-Leasebacks Still Attractive Alternative to Unlocking Capital
Uncertain economic conditions often prompt corporate real estate owners to explore sale-leaseback transactions as a means of unlocking capital. While Patterson hasn’t seen a major uptick yet, he expects that to change as 2025 progresses.
“There are early signs of increased sale-leaseback activity,” Patterson says. “While we haven’t seen a huge spike just yet, M&A activity has been improving, and sale-leaseback volume often follows that trend.”
He also notes that while uncertainty can sometimes deter companies from making long-term commitments, it can also push them toward alternative capital options, such as sale-leasebacks, to improve liquidity.
Preparing for What’s Next
With so much uncertainty, investors are focusing on proactive strategies to reduce risk and position themselves for long-term success. According to Patterson, much of this work happens upfront, from structuring leases with protective provisions to ensure that asset selection aligns with long-term needs.
“The good thing about net leases is that once you’ve bought a building and signed a lease, there’s an expectation of long-term stability and predictability,” he explains. “The key is making sure those early decisions — such as lease structuring and tenant selection — are as strong as possible.”
Active asset management also plays an important role. Maintaining strong relationships with tenants, tracking performance and being flexible with their needs can help investors handle potential challenges in the future.
While economic uncertainty continues to persist, investors who remain disciplined and adaptable will be well-positioned for success, and Patterson remains optimistic about the net lease market in the months ahead. “I don’t see an impending cliff or major downturn,” he says. “The best approach is to stay informed, track policy changes and make smart, forward-looking decisions.”
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