Net-Lease Investment Recovery Continues, Driven by Strong Industrial, Retail Demand

The U.S. net-lease investment market continued its recovery in the first quarter of 2025, driven by robust demand in the industrial and retail sectors, highlighting the sector's resilience and attractiveness to investors seeking stable, low-risk opportunities, according to the latest research from CBRE.

Net-lease properties are characterized by a lease structure in which the tenant agrees to pay a portion of or all of the taxes, insurance fees and maintenance costs in addition to rent. Total net-lease investment volume increased by 9% in the first quarter of 2025, reaching $9.6 billion. For the year ending Q1 2025, net-lease investment volume increased by 21% year-over-year to $44.6 billion.

While office and industrial & logistics assets declined seasonally in net lease investment between Q4 2024 and Q1 2025, retail net-lease investment saw an 11% increase quarter-over-quarter to $3.1 billion. Industrial & logistics assets represented $4.7 billion or 49% of total net-lease investment volume in Q1 2025, up from 46% a year ago. The retail sector’s share rose to 32% ($3.1 billion) from 25% a year ago, while the office sector’s share decreased to 19% ($1.8 billion) from 29%.

"Driven by its inherent stability and appealing risk-adjusted returns, the net lease sector showed impressive resilience and growth in Q1 2025," said Will Pike, President of Industrial & Logistics / Net Lease Properties for Capital Markets at CBRE. “Looking ahead, we expect sustained investor interest in net lease assets, especially within the retail and industrial & logistics spaces, as they navigate potential market uncertainties by favoring lower-risk placements.”

Private investors remained the largest buyers of net-lease assets, with their total capital volume increasing by 13% year-over-year in Q1 2025 to $4.4 billion. Institutional investors and equity funds contributed $2.5 billion in Q1 2025 net-lease investment, rising 17% quarter-over-quarter and 22% year-over-year. REIT investment in net-lease properties declined by 16% from a year ago to $529 million.

Cross-border net-lease investment decreased by 8% year-over-year to $774 million, with international buyers comprising 11.6% of total U.S. net-lease investment volume in Q1 2025, down from 13% in Q4 2024 and 10% in Q1 2024. Total cross-border net-lease investment for the year ending Q1 2025 surged by 94.1% compared to the year ending Q1 2024, with the U.K., Canada, Japan, Singapore, and Spain representing 90% of this activity.

The average net-lease cap rate increased by 7 basis points (bps) quarter-over-quarter and 48 bps year-over-year to 7.0% in Q1 2024. The retail sector recorded the largest cap rate increase, rising by 60 bps year-over-year, while the average for office and industrial assets increased by 43 bps and 14 bps, respectively.