Commercial real estate investing is a dynamic industry, and it’s imperative that you are aware of how that dynamism impacts triple-net leasing. Everything from federal interest rates and consumer preferences changes to a new piece of technology could upend triple-net lease preferences.
At Brisky Net Lease, we understand that knowledge is a key element for any triple-net lease investor. The better you understand the market, the better you are primed to use that knowledge for a quality investment.
To help you with that goal, we assembled a list of four trends that we see impacting the investment arena in 2023.
Read On To Learn More About 2023 NNN Lease Trends!
NNN Lease Trend 1: Rising Interest Rates
It’s no secret that there are a lot of conflicting macroeconomic trends in the news. Whether it’s a better-than-expected jobs report, tech layoffs, or the collapse of a critical tech bank in Silicon Valley, the economic news of 2023 has been interesting, to say the least.
One trend in particular that has been difficult to ignore in the triple-net lease market has been the steady rise in interest rates. Towards the end of 2022, interest rates were higher than they’d ever been in recent years and according to the Federal Reserve System, there will likely be additional increases in interest rates as we move through 2023.
This doesn’t necessarily mean it’s a bad time for triple-net lease investors to invest in property. On the contrary, triple-net lease investments are generally considered a lower risk – even with rising interest rates – due to their positive ROI and solid potential for reliable income.
NNN Lease Trend 2: Sustainability
For most triple-net investors, sustainability is usually not a primary factor in determining where to invest. However, there is growing renter demand for sustainable properties. There are huge advantages for renters seeking environmentally-sustainable triple-net lease properties to rent.
In NNN leases, sustainability isn’t just a buzzword. Renters, pressed by inflation, are looking for more energy-efficient properties to cut costs on utilities. More and more NNN investors must disclose their ESG score (Environmental, Social, & Governance) to satisfy cost and environmentally- conscious tenants who want to keep their utility, insurance, and tax costs low.
Measuring, improving, and benchmarking an ESG score is difficult, especially since NNN leases typically involve low visibility into how a tenant manages a property. Still, know that more and more tenants want to understand your sustainability measurement and what you are doing to improve the environmental impact of a property. We recommend researching the sustainability and environmental friendliness of your NNN portfolio now for the best results. It’s better to have some data to work with now before you are pressed on the issue by a possible tenant.
NNN Lease Trend 3: Return to Office
While the economic backdrop of 2023 is unclear, one trend is crystal clear. More and more corporations, for various reasons, are demanding that their Work-For-Home employees return to the office. The reasons why are myriad. Some corporations want to improve company culture, some want to increase cybersecurity, and some are trying to maximize productivity with reduced headcount.
The demand for Return-To-Office also coincides with large metropolitan areas incentivizing the tax breaks and preferential policies they gave large employers. A large office demanding employees spend at least 2 or 3 days on the company’s premises could drastically impact the local economy. Many cities hope to see large returns to physical offices this year.
Regardless of why Return To Office is occurring, it will impact NNN investments. Consider investing in triple-net lease properties that are close to large offices and likely to benefit from a return of office workers. For instance, quick-service restaurants, gas stations, and grocery stores could benefit from a local employer returning most of its workforce to a nearby location.
NNN Lease Trend 4: Digital Experience
Prop tech is changing the NNN world, and you might need to adjust as well! Renters are becoming savvier in their expectations for commercial property, and NNN is not exempt from this. New and innovative prop tech will continue revolutionizing how commercial real estate is bought, managed, and assessed. Everything from analyzing risk, detecting fraud, finding new properties, and assessing work orders will be impacted by new tech.
There are many prop tech vendors and apps to be aware of, so we won’t list possible solutions here. However, know that tech offers countless opportunities, both for you as a NNN investor and for your tenants. We recommend considering how prop tech could change:
- How You Find NNN Leases
- How You Evaluate The Market
- How You Interface With Renters
- How You Detect Fraud
- How You Manage Work Orders
We recommend taking a look at this article here for a better understanding of your unique situation.
Stay Up To Date With Brisky Net Lease
Triple-net leases can be complex, and the market doesn’t look to get any less convoluted in the months ahead. As the nation prepares for economic uncertainty, look to the NNN lease market for healthy returns and lower risk. To successfully wade through the market, interest rates, the myriad forms of prop tech, and environmental considerations turn to Brisky Net Lease. A qualified commercial real estate service is essential when looking at triple-net leases.
We aim to be a helpful resource for anyone considering an NNN investment property. We might, depending on your unique situation, offer any of the following services:
- Personalized NNN Investment Recommendations
- Underwriting
- Property Evaluation
- Consultation on Off-Market NNN Investment Opportunities
- Property Marketing For Seller Representation
Contact Our Commercial Real Estate Brokers To Get Started On Your Next Triple Net Investment Venture