There is no consensus among survey respondents about the current state of the supply of net lease properties for investment. In all 29 percent said there was “too little,” the highest number since our 2017 survey. Meanwhile, 32 percent said there was the “right amount,” down from 43 percent a year ago. Another 22 percent said there was “too much” supply—up from 19 percent a year ago and the highest level in the six years WMRE has been conducting the survey. (Additionally, 17 percent said they were unsure, further underscoring the lack of clarity on market conditions.)
Matt Bear, founder of Bear Real Estate Advisors, has a different take on the supply-demand debate. “When people say that there is not enough supply, what people are really saying is that there is not enough supply of the deals that they want to do,” he said. “There are deals everywhere, but the question is, do you want them or not?”
For certain assets, like industrial and medical, it’s a seller’s market. For others, like retail and office, it’s a buyer’s market.
“A lot of people who wouldn’t consider selling in the past are seeing the strong demand for assets and have changed their mind and are thinking about selling now,” said Jon Hipp, principal of U.S. Capital Markets and head of U.S. Net Lease Group with Avison Young. “They’re trying to get out of properties with shorter terms and roll into something longer term.”
Regarding the current level of net lease development, respondents have little to no concern about overbuilding. In fact, 26 percent said there’s too little development right now—the highest figure since our initial 2016 survey. Another 46 percent said there’s just the right amount of net lease construction (down slightly from 49 percent a year ago), and only 13 percent said there was too much, down from 24 percent of respondents who were concerned about overbuilding a year ago. (An additional 15 percent said they weren’t sure.)
“Development was hamstrung last year, limiting supply of new deals,” noted Camille Renshaw, CEO & co-founder of B+E Net Lease. “This year developers are ready to break ground, but the cost of construction has skyrocketed, and they are having to restructure budgets and project timelines.”