Institutional investors in large-scale commercial real estate often turn to strategies that provide steady income with low risk. One such approach is Triple-Net (NNN) leases, where tenants cover most property expenses.

A great example of this in action is National Retail Properties Inc., which owned 3,449 properties in the first quarter of 2023—a 3.6% increase from 3,328 properties in the third quarter of 2022. Interestingly, growth between the second and third quarters of 2022 was minimal, at just 0.69%. This steady expansion highlights how NNN leases can help institutional investors achieve reliable long-term returns.

In this blog, we’ll explore why NNN leases are a popular choice in institutional-grade real estate strategies.

Top Benefits of Triple-Net Leases for Institutional-Grade Real Estate

In real estate investment, “institutional grade” describes properties that align with large institutional investors’ investment criteria and standards. These include pension funds, insurance companies, and Real Estate Investment Trusts (REITs).

Here are just some reasons why NNN leases are beneficial for this type of commercial real estate:

Low-Risk Investment

Tenants of NNN properties typically look for convenient locations for their customer base and ensure high visibility and foot traffic. This focus on prime locations is crucial for NNN leases, as tenants are often long-term, established businesses that want to maintain their presence in high-demand areas.

Consequently, if a tenant vacates, the property is likely to attract other quality tenants due to its advantageous location. For commercial real estate investors, this adds an extra layer of security. Even with tenant turnover, the chances of quickly leasing the property to another reliable tenant remain high, making NNN leases especially attractive in prime locations.

Tax Deferral Through 1031 Exchanges

Investors can postpone capital gains taxes when they sell an investment property via a 1031 exchange. They can defer these taxes by using the proceeds to purchase another property of equal or higher value, which is why this exchange is also called a like-kind exchange.

This tax strategy is particularly beneficial for shopping centers with NNN leases, as investors can sell a property with an NNN lease and reinvest in another similar property while postponing capital gains taxes. It helps maintain cash flow and allows investors to leverage their equity for a higher-value property with greater income potential.

In other words, NNN properties is a great option for those looking for a stable, long-term investment with consistent cash flow. There are many NNN properties available across the country. However, it’s important to seek professional help to navigate the market effectively. Get valuable guidance from experienced real estate experts and ensure you make informed decisions that match your investment goals.

About Cindy Hopkins Commercial Real Estate (CHRE)

Cindy Hopkins Commercial Real Estate (CHRE) is a full-service brokerage focused on meeting the needs of the commercial real estate industry. Our experienced team represents landlords, tenants, and buyers, ensuring exceptional service and real results for our clients.

We know each client has unique needs, so we use our extensive network of professionals to provide tailored solutions. Contact us today for a consultation, and let us help you with your commercial real estate needs!