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How to Strike a Deal In a Stagnant Net Lease Market

By Chad Kurz
March 01, 2023

Transactions have slowed in just about every category for commercial real estate and net lease is no exception. The reasons are myriad for that but let's boil them down to two in particular: 1) sellers do not want to sell their property for less money than it was worth previously; and 2) sellers are taking on more risk and getting the same return.

Sellers, quite understandably, do not like the idea of selling something for less money than it was previously worth. Unfortunately, with many net lease assets having minimal or no rental increases in the base term, a diminishing lease term, and difficulty backfilling the locations at similar rent, values for these asset classes might never return to what they were just a year ago in our professional lifetime. This psychological issue prevents transactions from occurring. Most net lease owners didn't realize or wouldn't acknowledge the bond bubble that propelled property values had ended at some point, and many owners still don't understand what that means.

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