Jeffrey Weil / June 4, 2025
Net Lease Volume Slows, But Demand Persists for Rock-Solid Assets Backed by Big Brands
by Jeffrey Weil, Founder and President of November Capital
Despite a noticeable slowdown in overall deal volume across the net lease sector, a core segment of the market remains as resilient as ever: single-tenant properties leased to iconic, creditworthy brands like McDonald’s, Chipotle, and Chick-fil-A. These assets continue to attract 1031 exchange buyers who are seeking stability, passive income, and long-term security—even at cap rates below 5%.
Over the past 18 months, elevated interest rates and a more selective lending environment have contributed to a decline in transactional activity within the net lease market. Institutional investors are more cautious, developers are hitting pause on new ground-up projects, and many private buyers are sitting on the sidelines, waiting for more favorable pricing or financing terms.
But 1031 exchange buyers often don’t have the luxury of time or perfect conditions. Faced with IRS timelines and the need to reinvest proceeds from the sale of a relinquished property, they continue to seek out reliable, low-maintenance investments. This has created sustained demand for trophy tenants with strong balance sheets and long-term lease commitments.
That’s where brands like Chipotle, McDonald’s, and Chick-fil-A shine. Backed by multi-billion-dollar market capitalizations and often corporate-guaranteed leases, these properties offer the kind of passive, “set it and forget it” income streams that 1031 investors crave. With 10- to 20-year lease terms, minimal landlord responsibilities, and tenants that have demonstrated durability across economic cycles, they provide peace of mind in an uncertain macroeconomic environment.
Even in today’s tighter yield environment, investors are still willing to accept sub-5% cap rates for these kinds of assets. For many, the trade-off is clear: take the hit on yield in exchange for tax deferral, a hands-off ownership structure, and a tenant unlikely to default. In this context, the stability and predictability of a Chick-fil-A or McDonald’s rent check outweigh the incremental return of a more management-intensive or riskier asset.
While we may not see a full rebound in net lease volume until interest rates stabilize or cap rate expectations reset further, the appetite for blue-chip net lease investments is alive and well. As long as 1031 exchanges remain part of the tax code and investors continue prioritizing income security, properties leased to best-in-class operators will remain highly sought after—even in a slower market.
