Individual Investors Squeezed Out of Net Lease Space by Institutions
San Francisco, United States (IBwire.com - November 19, 2012)
A recent panel at the National Net Lease Investment Conference, held in Chicago on November 1, explored the issue of competition between individual investors and large institutions in the net lease market. This market has traditionally been the province of the individual investor, however, large players have been increasingly entering this market space recently.
Is the small investor being squeezed out? There are effects from institutional investment on pricing and availability of net lease space. However, National Net Lease conference consensus was that individual investors are still viable in the net lease space - but are being challenged in the space.
Often, “there are three, four, five, six or seven institutional entities bidding on the same assets and oftentimes there is another handful of private investors, whether it’s doctors or dentists or a 1031 buyer,” explained Andrew Fallon, explained assistant vice president real estate investment brokerage firm Calkain Companies.
Institutions were regarded as the leaders by far when transactions exceed the $10 million mark. Under the $10 million mark the net leased space is a more deal focused market. Both institutional and private investors can take advantage depending on the specific property and transaction.
What about the impact of increased institutional activity on real estate advisers, such as those in the Off Market Association and at brokerage firms? Updated information and the urgency of the buyers and sellers were noted as factors on which advisers can still capitalize. Brokers with accurate and absolutely current information who communicate well with clients remain strong.
From almost every U.S. region, NNN supply is tight and the demand is high, according to CIRE magazine and CCIM members. Why? Investors like long-term leases, credit tenants and stability of the investment.
The bottom line: individuals need to approach net leased transactions with aggressive pricing as well as an all cash position or financing already secured. This gives the individual a stronger position with the seller. Otherwise it can be difficult to compete with institutions.
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