The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful:
The marriage created by triple net lease investment is a natural one, creating a natural space for it in the market going forward. Typically, a business doesn’t want the responsibility of owning real estate while operating their business, while investors don’t want the responsibility of managing real estate they own. The triple net lease market allows owners to own, while businesses are in charge of their everyday property operations.
Richard Wilson: What do you think the future of the net lease commercial real estate market really looks like?
Peter Von Der Ahe: I think, just from a demographic standpoint, you know, you have the baby boomers who are continuing to run through the demographic cycle, and that bodes very well for this asset type. I think as you see the economy diversify, everything that’s happened over the past 6 months – you’ve seen what’s happened with supply chains, warehousing with Amazon, and all that type of last mile stuff – so you’re seeing whole categories of real estate change in terms of how they’re used and companies uses of them. I think that’s going to expand; the real marriage with net lease is that private investors that want to own the real estate. You have companies that want complete control over their real estate but they don’t want to own it.
If they have an operating business, they’re most likely making 20-30% margins, or hopefully they are, in their operating business they don’t want their money tied up in real estate that maybe appreciates 3% a year or whatever. So, it’s a perfect marriage between investors who want to own real estate but don’t necessarily want to operate it, and companies that want to operate their real estate but they don’t necessarily want to own it. So I see this trend continuing because it’s good for companies, and also just the demographics of the investor pool in the country as people shift from management intensive real estate to this type of real estate.
Richard: Right. It’s interesting how seldom net lease real estate investments come up compared to multi-family, self-storage, within the private investor space. So I appreciate you bringing all of that up.