Favored net rental asset classes are changing in response to the times

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By far, the industrial asset class has become a favorite among net rental investors and, for that matter, the larger commercial real estate space. But behind this category, retail and office are also competing for the favor, with surprising results.

In fgeneral, the net rental market performed well Since the pandemic, its share of the total market has risen to 15.5%, Revathi Greenwood, global data and information manager at Cushman & Wakefield, told GlobeSt.com. Greenwood delivers opening speech at GlobeSt. LOCATION NET conference, that starts today.

But the allocation of the net rental investment has changed since the health crisis, she notes. Before the pandemic, retail represented a quarter of the market. Then, during the crisis, it was roughly split between office and industry. “Retail is now down to 16% and offices to a third,” she says.

Today, these trends are evolving, guided by changing conditions in the net rental market as well as the evolution of the broader asset class. Office, for example, is starting to open up amid fears that businesses will significantly back down. “Most employers have publicly stated that while flexibility is something they want to give their workforce, the benefit of being back in the office and the ability to drive collaboration and innovation are also important, ”says Greenwood. More jobs will be added to the US payroll in the months and years to come and “over the next three to four years we will return to an upturn in demand for office space.”

Retail also appears to be making a comeback, says Mark Maughan, managing director of Net Lease Investments in Sundance Bay. Maughan also participates in the GlobeSt. NET LEASE conference.

“There is massive pent-up demand and people want to come out,” he says. During the pandemic, retail has become a four-letter word, but now tenants want to sign leases, he continues. Indeed, the negotiating power of commercial leases has returned to the owners. “During the pandemic, tenants tried to exercise this [influence over their leases] they could and the owners have worked with them, but the demand is back and we are seeing owners taking back control. “

Net lease investors also favor certain markets, Greenwood adds, with Boston being one of the main markets today. Many California markets are also doing well, as are Dallas and Houston, particularly in the industrial and retail categories. Miami arrived in the rankings along with Philadelphia, Chicago and New York, for retail.

These trends are obviously not the result of chance. They depend on the product available in those cities and on having strong, creditworthy tenants ready to sign long-term leases, Greenwood says.


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