The Current State of the Net Lease Market: A Post-Boom Reset
After a blistering run during the low-rate era of 2020 and 2021, the net lease market has entered a new phase—more measured, more cautious, but still fundamentally sound. The sector, once flooded with 1031 exchange capital chasing yield and safety, has seen a meaningful slowdown, particularly among private exchange buyers. That said, demand hasn’t disappeared—it’s just become smarter, more disciplined, and more selective.
Interest Rates: The Elephant in the Room
The most significant factor reshaping the market is interest rates. With the 10-year Treasury hovering in the 4.3%–4.8% range, debt remains expensive. This has been particularly painful for 1031 buyers who typically rely on leverage to juice returns. When borrowing costs are at or above cap rates, the traditional appeal of net lease—predictable cash flow with minimal management—starts to erode for some investors.
Back in 2021, Chick-fil-A and Chipotle deals were routinely trading in the low 4% cap range, sometimes even tighter for trophy locations. Today, those same assets are trading in the mid 4s to low 5s, depending on lease term, rent escalations, and market. It’s a noticeable shift, but these deals are still commanding strong pricing relative to the broader market—a testament to the brand strength and unit-level performance of these operators.
The 1031 Buyer Pool Has Thinned
Private capital still exists, but it’s become far more selective. Compared to 2021, when 1031 exchange buyers were buying quickly and aggressively, there’s now more hesitation. Some sellers report a 30–50% drop in the number of serious inquiries on new listings. The buyers that remain are underwriting more conservatively, insisting on better locations, stronger rent coverage, and lease structures that offer more downside protection.
In many cases, sellers are still anchored to 2021 pricing expectations, creating a gap between what the market wants and what’s being offered. Developers are beginning to adjust, but not all at the same pace. The result? A quieter market—not frozen, but slower, and with more give-and-take in negotiations.
Trade Talk & Tariffs: A Possible Undercurrent
Adding a layer of uncertainty is the return of a Trump administration and the corresponding reemergence of tariff discussions. While it’s too early to say exactly how trade policy will unfold, the threat of increased tariffs—especially on goods from China—could have downstream effects on the retail sector and, by extension, the net lease market.
If tariffs drive up the cost of goods, retailers that rely on imports could see margin pressure. That doesn’t necessarily affect tenants like Chick-fil-A or Chipotle, whose business models are built on domestic supply chains, but it could shift capital toward these “safer” restaurant operators even more. Investors may gravitate toward tenants with strong brand equity, operational resilience, and limited international exposure.
There’s also a scenario where tariffs could fuel reshoring and domestic manufacturing—potentially increasing demand for industrial assets. That would put upward pressure on pricing in sectors adjacent to net lease retail and perhaps reinforce the idea that simplicity and reliability (hallmarks of single-tenant retail) are valuable in a volatile global economy.
Where Things Stand
The net lease market today isn’t in distress—it’s in transition. We’ve moved from a market driven by easy money and tax-driven urgency to one governed by fundamentals and long-term value. The deals getting done now are often cleaner, better-located, and supported by stronger tenants than many that traded at the peak.
For investors with dry powder and patience, the next 12–18 months could offer compelling entry points—especially if sellers begin to capitulate further or if rates finally start to fall. And for the long-term holder, the core appeal of net lease remains: passive income backed by brand-name tenants, minimal operational responsibility, and leases that hedge against inflation through built-in rent bumps.
This is a new market—but not a broken one. The fever has broken, and in its place is a quieter, steadier kind of opportunity.