Net-Lease Investment Declines Considerably

Executive Summary

• Net-lease investment volume fell by 63% year-over-year in Q1 to $7.9 billion, compared with a 55% drop in total commercial real estate investment volume.
• For the year ending Q1 2023, net-lease investment volume decreased from the comparable period in 2022 by 41% to $59.8 billion. Total commercial real estate investment volume over the same period fell by 35%.
• Among the major commercial real estate sectors, the industrial & logistics share of net-lease investment volume increased to 52% in Q1 2023 from 41% in Q1 2022 and the retail share increased to 34% from 21%. The office share fell to 14% from 38%.
• The average net-lease cap rate held steady quarter-over-quarter at 5.8%.
• The U.S. 10-year Treasury yield averaged 3.7% in Q1—its highest level since 2010. Spreads between the average net-lease cap rate and the 10-year Treasury rate decreased to 216 basis points (bps) in Q1 2023 from 367 bps in Q1 2022.