Wednesday, October 17, 2012

Barclay Jones on the Net Lease Market

Net Lease Market News Q: How do you view the net lease market today? A: The net lease market today continues to be pretty strong, and demand for income product generally remains high. The net lease market does distinguish between the quality of income streams and leverage levels are very sensitive to credit quality. Certain product types have stronger demand characteristics as well, with a general preference for well-located industrial. Q: How do you view the net lease market in 6-12 months? A: Over the next 6-12 months, I expect rates to stay low and the market to continue to have demand for yield product. Hopefully, the recovery will begin to gain strength and we will see continued recovery in the housing market as well. With continued recovery, I expect that eventually rates will firm up in anticipation of a stronger economy. Cap rates should rise slightly as well, but I expect the net lease market to continue to be vibrant. Q: What important factors should people be watching for? A: Caution is warranted with the experience of the European real estate and debt markets. Relatively modest vacancy and performance downturn have been met with serious market disruption due to the sovereign debt crisis and ensuing bank recapitalization issues. The US securitization market continues to recover, but this bears a close watch. Q: What trends do you see carrying on into the future? A: The demand for yield product and below long term trend economic growth appear to be trends that will carry into the near term future. Technology and the internet will continue to effect real estate markets as the world evolves with the web. Major metropolitan areas continue to benefit from the tech concentrations and the employment concentrations they create.

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