Does the Spike in Net Lease Office Acquisitions Signal Waning Confidence in Economy? – NREI

Investment in net lease office real estate more than doubled in the second quarter of this year, going up by 65.7 percent compared to the second quarter of 2018 to $8.2 billion, according to research from real estate services firm CBRE. Investment in net lease real estate overall, including office, industrial and retail properties, increased by 33.8 percent to $20.6 billion—a record since CBRE began tracking the market in 2002.

The sharp increase in investment in the office net lease sector involved some very big deals, including the sale leasebacks of Manhattan’s 30 Hudson Yards for $2.2 billion, two San Francisco assets, Park Tower at Transbay for $1.1 billion and Youtube’s headquarters for $221 million; and GE’s global headquarters in Boston for $252 million.

With the stock market on a roller coaster ride and looming potential for a recession, there is a flight to safety among investors, and net lease properties offer compelling risk-adjusted returns, says Will Pike, vice chairman and managing director of CBRE”s net lease practice.

“Today, with warning signs of a coming recession, net lease real estate is especially attractive to investors, as these assets can provide steady returns during a recession, as opposed to the potential volatility in the stock market,” adds Marc Imrem, managing director of the national net lease and sale leaseback group with real estate services firm Transwestern.

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Article by:
Patricia Kirk | Sep 16, 2019 | NREI