One of the hottest property sectors emerging in commercial real estate right now is the Single-Tenant Net Lease (STNL)
Featuring insights from George Pino, CEO of Commercial Brokers International
In today’s evolving commercial real estate (CRE) landscape, one segment is steadily regaining its shine: single-tenant net lease (STNL) properties, also known as triple-net (NNN) investments. To better understand this trend, we sat down with George Pino, CEO of Commercial Brokers International, who has completed hundreds of STNL transactions across 39 states.
With market sentiment improving, cap rates adjusting, and new tax advantages in play, now might be the perfect time for investors to revisit the stability and long-term returns that STNL deals can offer.
Market Recovery: A Quiet Comeback
After a steep 60% decline in single-tenant deal activity through early 2024—driven largely by interest rate hikes and tighter lending conditions—the market has begun to rebound. By mid-2024, the drop had narrowed to 19%, and by year’s end, just 13%. Entering 2025, investors are returning with more confidence.
“If anything, now may be the opportune time to make that actual investment in single-tenant net lease,” George says.
While we may no longer be at the market’s bottom, the trajectory suggests a stable recovery—offering opportunity for investors who act before competition returns in full force.
Cap Rates Are Normalizing—But They Vary Widely
Cap rates across STNL deals have climbed from pandemic-era lows, now averaging around 6.9%. But averages can be deceiving. National QSR tenants like McDonald’s or Raising Cane’s may trade at 3.5%–5% caps due to their strong credit and brand presence. On the flip side, smaller tenants in tertiary markets may offer double-digit returns—at higher risk.
“It’s all about understanding the risk-reward tradeoff,” George advises. “Focus on quality tenants and great locations, not just headline cap rates.”
Bonus Depreciation Is Back—and It’s a Game-Changer
With the passing of the recent “Big Beautiful Bill,” bonus depreciation has returned for certain property types like car washes and gas stations—making STNL deals even more attractive. This allows 100% first-year bonus depreciation, a major tax-saving tool for high-income investors or those seeking to shelter gains.
“If you're a professional in real estate, that bonus depreciation may even offset your active income,” George notes. “But of course—check with your CPA.”
Why Investors Continue to Favor STNL Assets
1. Predictable, Long-Term Cash Flow
With leases that often span 15 to 20+ years, investors enjoy stable income with fewer surprises.
2. Expense Shielding
Triple-net structures shift responsibilities for taxes, insurance, and maintenance to the tenant—especially critical as operating costs surge in multifamily and multi-tenant assets.
3. Better Tenant-Landlord Alignment
Retail tenants have a vested interest in keeping the property updated, clean, and customer-ready, aligning with landlord goals for property value and retention.
What to Evaluate Before You Invest
George Pino emphasizes that location is everything. Even with a strong tenant, poor visibility, low traffic, or weak demographics can kill a deal's long-term value.
Key factors to assess:
Visibility and traffic counts
Nearby anchors like hospitals or grocery chains
Local job growth and income trends
Your long-term exit strategy
“The biggest mistake,” George warns, “is being cap-rate driven instead of location-driven.”
What’s Really in the Lease? The Fine Print That Defines Your Return
Not all triple-net leases are created equal, and failing to dig into the details can seriously affect your long-term returns. A seemingly solid lease may have outdated insurance language that doesn’t meet lender requirements, missing clauses around late fees, or vague maintenance provisions that leave you unexpectedly on the hook. These nuances may not show up in a marketing package but can quickly surface during a refinance or sale—and by then, it’s often too late.
According to George Pino, smart investors evaluate a lease the same way a lender or future buyer would: stress-testing each section, from insurance to expense pass-throughs, before making an offer.
Lease Renewals and Remodels: Unlocking Value Beyond the Rent Check
While some investors avoid STNL deals with short remaining lease terms, George sees opportunity—if you approach it strategically. Engaging the tenant early, even years before expiration, can pave the way for favorable renewal terms. Sometimes it’s a simple value trade: offer a small rent discount in exchange for a fresh 15- or 20-year lease, which immediately boosts the property’s resale value.
Others may consider co-investing in remodels or property enhancements. Mid-cycle upgrades not only extend lease longevity but have been shown to increase tenant sales by 12–40%, which improves business performance and, ultimately, strengthens your cash flow as a landlord.
Reading the Cap Rate Right: Understanding the Spread
Cap rates in the STNL world can vary dramatically depending on the tenant, asset type, and market. Top-tier quick service restaurants like McDonald’s might trade near 4.25%, while medical users such as dialysis centers or urgent care clinics hover closer to 7%. Flex and industrial STNL deals can push even higher, up to 8% or 9%.
Geographic location also plays a key role—markets like Los Angeles or New York often see compressed cap rates by 50 to 75 basis points due to strong investor demand. But chasing a high cap rate in a weak market can backfire.
George reminds investors to weigh risk-adjusted return, tenant quality, and long-term viability—not just the number on the flyer.
Inflation as an Advantage
While many investors fear inflation, STNL owners may actually benefit. With tenants covering taxes, insurance, and maintenance, rising operating costs don’t eat into landlord profits. And with many leases including annual rent escalations—typically 2–3%—your income can grow in pace with inflation or even outstrip it. “The smart investor sees inflation not as a threat,” George says, “but as a built-in advantage in net lease structures.”
In a World of Volatility, STNL Means Predictability
Interest rates remain volatile. Policy decisions shift by quarter. CRE fundamentals are evolving. Yet through all this, single-tenant net lease properties offer a rare kind of stability. With minimal management, long-term cash flow, built-in expense protections, and new tax incentives via bonus depreciation, STNL investments stand out as a strategic play for both seasoned and new investors. Whether you’re trading out of a multifamily property via 1031 exchange or looking for a low-maintenance cash-flow vehicle in uncertain times, now may be the moment to take a closer look at STNL.
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If you’re serious about building long-term wealth through commercial real estate, now’s the time to act.
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