The net rental real estate sectors that saw the largest increase in sales volume in 2021 are industry and retail. Industrial sales were up 75% over 2019 activity with $37.3 billion in transactions. Net leased retail volume totaled $18.3 billion in 2021, a 65% increase from 2019, according to JLL.

Investor sentiment in WMREAnnual net lease investment research tracks sales activity. More than half of respondents (54%) said that manufacturing was the most demanded sector by investors, followed by medical practices/healthcare at 38% and restaurants/fast food at 24%. (Respondents could select up to three property types.) The least popular property types were office and fitness, each at 6%, and automotive at 7%. When looking at the history of the survey results, industrial demand has seen the greatest improvement from 24% in 2016 to its current level. By comparison, pharmacies have fallen from a high of 40% in 2016 to 20%. This drop in sentiment towards pharmacies could be influenced by the announcement in 2021 that CVS would close some 900 stores over the next three years.

Coming out of COVID, investors have a strong appetite for “essential” properties, like grocery stores, convenience stores, fast food restaurants and automobiles. What is not appreciated is anything that is not essential, such as entertainment venues, cinemas and gymnasiums. Those companies are coming back, but they’re less sought after by investors, notes Mark E. West, senior managing director of JLL Capital Markets’ Dallas office, Americas and co-head of the company’s domestic Corporate Finance & Net Lease group.


Following a strategic decision in 2019 to increase its exposure to the industry, Spirit Realty has been an active buyer in both industry and retail. Although the majority of its portfolio, about 70%, is in retail, the acquisitions the company has made over the past 12+ months have been fairly evenly split between industrial and retail. “Not all retail businesses are created equal, but we are always happy with some parts of retail,” says Ken Heimlich, chief investment officer at Spirit Realty Capital Inc. For example, gyms and fitness centers are a sector that has struggled during the pandemic. “We always love fitness, it just needs to be the right operator,” he says.

Not surprisingly, industry topped the list when respondents were asked to rate the 12-month outlook for real estate sectors. Based on a 1-5 rating scale, with 5 being “excellent” and 1 being “poor”, Industrial rated 4.1, followed by Medical Practice/Healthcare at 4.0 and L groceries at 3.8. The sectors with the lowest ratings were offices at 2.8, fitness at 3.0 and banking/finance and government at 3.2 each.

“Based on structural trends, people think the future is extremely bright for the industry. The industry throughout the pandemic has seen incredible inflows of equity into this asset class, and it’s continuing. today, which is pushing returns on an unleveraged basis to historic lows, sometimes into the 3% cap rate range, which is truly unheard of,” says BJ Feller, Managing Director and partner in the Stan Johnson Company.

It should also be noted that respondents are more optimistic about the outlook for the net rental real estate sectors almost across the board. Opinions on the 12-month outlook remained the same or increased in all but two sectors compared to the 2021 survey. The two sectors that declined were government-leased assets, which rose from 3 .8 to 3.2, and banking/finance, which fell slightly from 3.3 to 3.2.

Buyer demand for government leased assets depends on the use and branch of government. Essential government uses such as a VA hospital will be in greater demand than a generic government office or post office in a small town, West notes. Additionally, there is always good demand for bank branches that have a good credit tenant, such as JPMorgan, Chase, and Bank of America. “Buyers want great locations and they’re going to dig down to the depot base there,” he says. “If these factors are strong, then the asset will trade very strong.”

The full version of the Net Lease Investor research, presented by WP Carey, will be released this month.

Survey Methodology: The WMRE Research Report on the Net Lease Industry was conducted via online surveys distributed to WMRE readers in March 2022. The survey yielded 232 qualified responses, the vast majority at the executive level of vice president or above. Respondents included a wide range of industry participants from owners, developers, brokers and lenders. Private investors were the largest group at 45%. Survey respondents are active nationally, with the highest percentages operating in the South/Southeast/Southwest at 46%, East at 43%, West/Mountain/Pacific at 37% and the center-west/east-west of the center-north at 33%. International investors also represented 10% of survey respondents.