Net Lease Midwest

Newmark Knight Frank's Berres: Net lease sector still a robust one

Newmark Knight Frank's Berres: Net lease sector still a robust one,ph01
Dollar stores continue to be a favored net lease asset type among investors

The net lease market, like much of the commercial real estate industry, is in the middle of a busy 2019. Investors are still bullish on net lease assets and aren’t afraid to sink their dollars into them. And the best news? CRE executives say that they expect even more growth in the net lease market.

Matthew Berres, executive managing director for net lease capital markets with Newmark Knight Frank, is a good example. Midwest Real Estate News spoke to Berres about the long hot streak that CRE and the net lease market have been on. He agreed with the consensus, saying that he expects this market to remain strong throughout the rest of 2019 and into the following year.

Berres is one of the big names who will be speaking during REjournals.com’s and Midwest Real Estate News’ Net Lease Summit held July 25 at the University Club of Chicago in downtown Chicago. The event, which runs from 8:15 a.m. until 3:30 p.m., brings together the biggest names in the net lease, sale leaseback and 1031 Exchange markets, all ready to share their thoughts on the strength of this commercial segment.

What are Berres’ thoughts on the net lease market? The sector is busy, he said, and looks to remain that way during the rest of 2019.

“We continue to see robust activity,” Berres said. “And it isn’t slowing down yet.”

Last year, Newmark Knight Frank closed about $68 billion in net lease volume, Berres said. He said that this probably ranks as the highest volume that Newmark has ever recorded in this sector. It represented an increase of about 16 percent from 2017.

Not surprisingly, industrial real estate accounted for a good portion of this activity. Berres said that about 50 percent of that $68 billion came from the industrial space. 

Another factor in net lease’s hot streak? Berres said that foreign investors continue to place their dollars into net lease assets in the United States. 

“There is a global search for yield and portfolio diversification,” Berres said. “Much of that is focused on industrial assets today. And foreign investors still see commercial real estate in the United States as a safe place for their money.”

While industrial real estate remains a favored class among investors, it’s not the only type of commercial real estate that is attracting attention. Investors are targeting healthcare real estate, too, especially as medical providers expand their footprints with medical offices and smaller off-site treatment centers, Berres said. 

And some retail assets remain popular among investors, too, he said. Investors like restaurants, fast food and grocers. 

“Investors are looking at the credit of the tenants, the lease terms of those tenants and the quality of the real estate,” Berres said. “Investors are definitely focused on the strength of the tenants. Are they quality tenants? And they are looking at how many years are remaining on these tenants’ leases. They like when there are several years remaining on leases.”

And the industrial market? That remains popular because, as Berres says, industrial remains one of the only asset classes in which investors can still have the opportunity for long-term growth, thanks to the continued rise of ecommerce.

For more information about the net lease market, be sure to register for the 5th annual Net Lease Summit on July 25. You can register here.