The 1031 exchange landscape for single-tenant retail continues to improve from its lows from 18 months ago, but it’s still a more measured market than what investors were used to prior to interest rate hikes and pre-covid. There’s consistent demand for net-leased properties backed by strong national tenants, largely because they provide stable, predictable income with minimal management. However, buyers are approaching deals with more discipline—underwriting assumptions are tighter, and there’s greater scrutiny on remaining lease term, rent escalations, and tenant credit.
Cap rates have adjusted to reflect the current rate environment, and that has forced a reset in pricing expectations on both sides to where the current market resides. While quality assets continue to trade, the limited supply of desirable replacement properties means investors need to be proactive and precise in executing exchanges.
For more information on investment sales, please contact Kyle Hartung!