The Best NNN Properties 2022

Nov 18, 2021

At the end of every year, Westwood Net Lease Advisors like to share our top NNN property investments for the coming year, and this year is no different. As you plan your investment strategy for 2022, keep this list of The Best NNN Properties on hand and let us know how we can help.

  1. Dollar General
  2. Retail pharmacies
  3. Gas & convenience stores
  4. Fast-food/QSRs with drive-thrus
  5. Early Education Centers & Child Care Assets

These “essential” businesses continue to adjust to the pandemic with more efficient business models and tools that have become so successful, they are now permanent, including omnichannel distribution, digital offerings, home delivery, AI, mobile apps, and general adaptability.

No other commercial real estate (CRE) investment offers the certainty of income and ease of ownership that the following mission-critical NNN retail properties offer.

1. Dollar General

Dollar General store with car in parking lot and yellow sign by the road

Investment-grade, credit-rated Dollar General continues to grow in sales and locations and provides reliable returns for its NNN investors, which makes DG our #1 choice for the best NNN property investment.

New additions to the DG brand such as pOpshelf, its first store in Idaho (its 47th state), construction of larger-footprint stores, omnichannel distribution, and the rollout of more privately-branded products, as well as increasing the number of distribution centers, make DG a robust company in the face of uncertainty.

All the above, plus its typical annual commitment to upgrade older properties and open roughly 1,000 new stores, demonstrate its commitment to its real estate value (and customers).

Dollar General NNN properties are a wise investment choice in any economy and make an excellent addition to any portfolio.

  1. Typically sell between $1–2 million.
  2. Average 12-month cap rate of 5.00–6.50%.
  3. Responsibility-free ownership – most are absolute NNN leases.
  4. Tenant has strong corporate credit and investment-grade ranking.
  5. Corporate-guaranteed leases.
  6. 15-year leases on new construction.
  7. Most often, 10% rent increases in each 5-year option period.
  8. Investor confidence – more locations, expansions, and relocations boost retail market share.

Moreover, purchasing a Dollar General property is usually a straightforward transaction, making these assets a popular choice for 1031 exchanges and those new to NNN investing.

Retail Pharmacies & Drug Stores

Single-tenant drug stores, such as Walgreens, have been our “Tenant of the Quarter” because they are consistently strong NNN investments that gain much of their value from their real estate.

Retail pharmacy brands are focused on becoming more modern with a wider range of beauty, grocery, household, personal care, and healthcare services offered via in-store and through omnichannel distribution. Most have also adapted well to the pandemic.

With numerous NNN investor benefits, growth projections, integrated needs-based products and services, and new locations annually, Walgreens and other retail pharmacies make our list of the best NNN lease investments for 2022.

  1. Typically sell between $4–7 million.
  2. Average 12-month cap rate of 5.00–6.00%
  3. Valuable real estate – 11,000–15,000 sq. ft. buildings on highly visible, well-landscaped, hard-corner 1- to 2-acre parcels with maximum visibility and easy access.
  4. Responsibility-free ownership: both operate with 15–20 year absolute NNN leases.
  5. Tenants have strong investment-grade rankings.
  6. Corporate-guaranteed leases.
  7. Lease extension options after the primary term.
  8. The addition of in-store, walk-in medical clinics with expanded products and services provide even greater stability.

Gas Stations & Convenience Stores

Gas stations and convenience stores such as 7-Eleven, Wawa, and Mountain Express are more popular than ever for consumers who not only want fuel, snacks, and beverages, but also grocery essentials, quick service meals, auto accessories, and more. During the pandemic, gas stations and c-stores became even more essential to their communities and expanded their offerings, as well as the number of locations. This increased investor availability, which continues today.

If you’re like most triple net investors, you may not have considered a gas station/convenience store combo as a viable NNN opportunity – the assumption is that the stores are owned or leased by the gas station brand. However, most gas and convenience stores operate independently. The corporations depend on their property investor partners to grow their market share.

Gas stations and c-stores are a great investment option for any lifestyle, financial requirement, and portfolio.

  1. Typically sell between $2–4 million, but can go higher for some tenants.
  2. Average 12-month cap rate of 4.50–6.00%.
  3. Responsibility-free ownership – most are absolute NNN leases, some modified NNN.
  4. Valuable real estate – most in high traffic areas on prime parcels of land.
  5. Tenants often have strong credit ratings.
  6. Most often, 15- to 20-year leases on new construction.
  7. Corporate-guaranteed leases with extension options.
  8. Rent increases are built into leases.

Fast-food/QSR & Drive-thrus

Despite a tough 2020 and the Great Resignation of 2021, the fast-food industry has rebounded and refuses to slow down. Fast-food, quick-service restaurants (QSRs), and drive-thrus are benefitting investors with a wide range of property choices and investor benefits.

Spurred by the pandemic, major fast-food and QSR brands such as McDonald’s, Starbucks, Taco Bell, and KFC have implemented a more efficient and profitable business model, including less indoor square footage, more express drive-thru lanes, digital services, AI, mobile app ordering, curbside pickup, and limited menu options.

Throughout 2021, the “drive-thru-only” COVID-19 business model evolved into a permanent business strategy, resulting in streamlined service, greater profitability, and more opportunities for NNN investors.

If you are considering a NNN investment in 2022, fast-food and QSR restaurants can be great opportunities.

  1. Typically sell between $1–3 million.
  2. Average 12-month cap rate of 4.00–6.00%.
  3. Responsibility-free ownership – most are absolute NNN leases.
  4. Major brands typically have strong credit.
  5. Most often, 15-year leases on new construction.
  6. Some offer corporate-guaranteed leases with extension options.
  7. Various rent increases built-in to leases; some annually, some after 5 years, etc.
  8. More drive-thru-only properties are creating investor opportunities.
  9. Income reliability – adaptive business models should keep them open and running during future crises.

Early Education Centers & Child Care Assets

An often overlooked yet very respectable NNN investment for 2022 is an early education center or child care asset, such as Kinder Care, Guidepost Montessori, or The Learning Experience. These income-producing investments carry the perception of unpredictability; however, if you know what to look for, these can be very predictable and generally come with higher than average cap rates.

These property types are not fighting the supply and demand situation we’re seeing with other NNNs, which makes it easier to purchase one without high competition. Additionally, child care property expansion is in the works for the next 24 months, which provides the opportunity to purchase a brand new facility with a full-term lease.

Moreover, while other NNN properties are selling at lightning speed, early education investments are not as well known, which is an ideal situation if you’re under the time constraints of a 1031 exchange.

  1. Typically sell between $1.5–8 million.
  2. Average 12-month cap rates of 6.00–7.00%.
  3. Minimal to no landlord responsibilities.
  4. Prime parcels of land with excellent visibility.
  5. Most often, 10- to 20-year NN+ and NNN leases.
  6. Lease extension options.
  7. Guaranteed leases – corporate, franchise, and/or owner guarantees.
  8. Generally, rent escalations built into the base lease (i.e., in years 6 and 11, 10% increase; 10% every 5 years, etc.).
  9. Not fighting an online sales cycle; adaptable to parental and child care needs.

Other Notable NNN Properties to Consider in 2022

Triple net properties are practical to own in any state without worry, no matter where you live. They offer affordable, essential products/services that keep them operational in any economy, most have internet-friendly or internet-resistant business models, and they have proven to be recession-proof. They are also typically more mortgageable and resaleable than non-NNN investments.

There are numerous asset classes, tenant types, location types, and lease types within the NNN market that offer responsibility-free ownership with stable monthly income for 10 to 20 years, rental increases to offset inflation, and wealth building through investment diversification.

Aside from our Top 5 Best Choices for 2022, other notable NNN properties to consider include:

  • Auto parts stores (O’Reilly, Firestone, AutoZone, Goodyear)
  • Medical, dental, and veterinary clinics (DaVita, Fresenius, Urgent Care, Aspen Dental)
  • Car washes (Tiger Express, Super Star Carwash, Mister Clean Car Wash)

To Wrap it Up – Keep This List of the Best NNN Properties for 2022 On Hand When Planning Your Investment Strategy

The new year is right around the corner! As you look to 2022 and plan your investment strategy, keep our list of the best NNN properties in mind. With the uncertain economy, pandemic woes, potential changes to the 1031 exchange, and an unpredictable stock market, Dollar General, retail pharmacies, gas and convenience stores, fast-food, QSRs, and drive-thrus, and early education centers and child care assets can offer worry-free income, stability, and competitive returns.

Not sure where to start? Westwood Net Lease Advisors is here to help you plan and purchase a NNN property that fits your goals and lifestyle, at no cost to you. We have a nationwide network of sellers, brokers, and developers, so we often know when a property is coming up for sale before it’s listed, and with any available property, provide a first-right-of-refusal advantage. Be sure to contact us today for more information and a no-obligation conversation. 314-997-5227


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