Net Lease Market Update


Insight By: Dave Gollenberg

Investment sales in the single-tenant net lease sector have dropped for the sixth consecutive quarter, reaching $9.4 billion in Q2, as reported by Northmarq. This marks a 54% year-over-year decline, reflecting more than a seasonal slowdown.

The largest publicly traded national brokerage shops reported the following losses in Q2:

JLL: Earnings plummeted by 99% to $2.5 million from the previous year’s $194 million, and overall revenue experienced a 4% decline, totaling slightly below $5.1 billion.

CBRE: Net earnings decreased by 95% compared to the same period last year, reaching $5.1 million, primarily attributed to a 48% drop in investment sales and other capital markets-related earnings.

Cushman & Wakefield: Revenue of $2.4 billion decreased $206.6 million or 8% compared to the three months ended June 30, 2022. Net income of $5.1 million decreased by $92.1 million compared to the three months ended June 30, 2022, principally driven by the decline in Leasing and Capital markets revenue of 20% and 48%.

Marcus & Millichap: National investment sales brokerage had a loss of $8.7 million, compared to a profit of $42.2 million in the year-prior quarter, as revenue slid nearly 60% to $163 million.

These reports indicate where market conditions currently stand within the greater CRE market. The decline follows a period of strong demand exceeding supply, with rising interest rates and stricter lending standards being cited as causes.

Retail was the hardest hit sector, experiencing a 52% drop from Q1 2023, while office and industrial sales in Q2 improved compared to the previous quarter but still significantly decreased by 50% to 60% year-over-year.

Notably, average cap rates rose, with the single-tenant net lease average increasing by 21 basis points to 5.95%. The report warns of potential fluctuations before rates settle into a more moderate upward trend.

Macroeconomic Metrics

  • Federal Funds Rate: 5.25-5.5%
  • Current Unemployment Rate: 3.5%
  • Inflation Rate: +3.2% YoY

Critical Dates

  • PCE Report: August 31
  • Jobs Report: September 1
  • CPI Data Report: September 13
  • FOMC Meeting: September 19-20

The market is undoubtedly undergoing a continued period of pricing discovery. While transaction volume is significantly down, the net lease market has experienced a 50%+ increase in deals on market. With turbulence in the financial markets, tighter lending standards, and a drying out 1031 buyer pool – it’s even more important for sellers to appropriately price assets to execute on transactions. See below for articles and earnings reports that elaborate on each point touched on in this newsletter.

GlobeSt. | Investment Sales Expected to Improve in H1 2024

GlobeSt. | Net Lease Investment Sales Plunge 63% in Q1

Cushman & Wakefield | Financial Results for Q2 2023

GlobeSt. | Banks Expected to Tighten Standards for CRE Loans Even More

U.S. Bureau of Labor Statistics | CPI Report for July

Trading Economics | United States GDP

GlobeSt. | Net Lease Influx of Inventory as Owners Hold Onto Assets Longer

For more insight on the state of the net lease market, reach out to Dave Gollenberg: (646) 809-8847 |