2022 was no doubt a challenging year the European economy and European commercial real estate (“CRE”). Investors and occupiers have had to adjust quickly to a new regime of higher financing costs, lower liquidity and slower economic growth.
In this context, defensive real estate strategies such as net lease/sale-leasebacks can provide an attractive opportunity for CRE investors. These strategies can enable investors to access stable, more secure and inflation-linked cashflows, in addition to longer-term capital appreciation potential and diversification benefits. This article reviews the drivers and merits of European net lease investment in Europe at this point in the cycle.
Net lease property typically consists of real estate let on long-dated, inflation-linked leases. These leases are typically double/triple net, whereby the tenant is contractually obligated to pay for most or all of property related expenses, insulating income from unforeseen increases in these costs. A key characteristic of net lease property is that a significant portion of returns is derived from contractually fixed income instead of more volatile capital growth.
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Supporting documents
Click link to download and view these filesThe case for net lease/saleleasebacks in Europe
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