The market for triple net lease properties is strong and stable as ever. Many brokers today agree that pricing for triple nets seems to remain stable. The current triple net market and the future of the NNN market look positive as this investment type retains a high national demand.
The Triple Net Market Tends to be Stable
For some investors with fewer connections, it can be a difficult time finding suitable NNN properties, especially for a 1031 exchange. While there do seem to be less NNN properties up for sale in today’s market for all investors, the triple net market tends to be stable. The properties are often in short supply due to the nationwide buyer demand.
In terms of financing, interest rates have remained consistent for a while. While this stability is good, it has not really translated into sellers reducing prices much. This is again another sign of the stability of the triple net market and the high nationwide buyer demand.
Prices for NNN properties have remained high, even with all the turbulence of the last ten years, because triple net leases tend to be a relatively safe investment. While many investors in other segments saw some serious profit loss and perhaps even had to deal with foreclosures – investments in NNN properties tend to retain stability though recessions. For example, with a creditworthy tenant such as a Dollar General or a McDonald’s store with a lease for the next 15 or 20 years, the monthly check will continue even in the middle of a recession. Most of our triple net clients suffered very little during the recession.
The New Federal Tax Laws Benefit NNN’s
The new tax laws provide many benefits and some disadvantages for NNN investment properties. The details of the changes remain a grey area that the IRS will start defining over time. However, a definite victory is that the 1031 Exchange law has not been repealed, and the 21% tax rate for C-corporations remains. Triple net property owners do not pay property taxes or municipal taxes, but for investors with just a single net lease in a high-tax state, being able to write off only $10,000 is a big deal.
Some investors who own a different property type feel the bite on transaction costs and obtaining property in a lower tax state. An upgrade to a triple net property is usually recommended, though, since future changes are unknown.
Retail Triple Net Properties Still Doing Well, Despite E-Commerce
There’s no question that e-commerce has affected most brick and mortar stores, but that impact leads to various results. Some of the weaker companies worked to step up to the plate while others ended up moving out. In reality, most commercial retail is still doing well and not all retail businesses are struggling. In fact, 90% of sales still take place in a brick and mortar shop.
There are two types of shops that do well in this economy. Retailers that provide competitive prices do well. Additionally, shops that provide an experience customers can only receive in-store succeed as premium retailers.
Triple Nets Going Forward
Triple nets will continue to be a strong investment for the future. Additionally, NNN properties also continue to be a fairly liquid investment. As the market starts tightening up again, more and more people will feel more comfortable about putting part of their portfolio in triple nets, because they are a lot safer than some other types of commercial real estate out there.
To Wrap it Up
The future of NNN looks stable and a triple net is often a good investment, though high demand leads to short supply. Brick and mortar shops are doing well and there has been little effect in the triple net market with the turbulence of the last few years. For those with patience looking for a stable and solid investment, a NNN lease is the way to go.
Contact an advisor today to learn more.
