**Ongoing Interest in CRE’s Net Lease Market Continues to Grow**
Single-tenant net lease properties—also known as triple net lease (NNN) assets—have been a staple in commercial real estate since the post-World War II period. Today, these properties, which often include car washes, convenience stores, quick-service restaurants, and auto service centers, have seen a sharp rise in popularity among investors.
John Chang, Senior Vice President of Marcus & Millichap, noted this increasing investor interest, particularly as NNN properties offer simplified ownership and tax advantages. According to recent figures released by Marcus & Millichap, transaction velocity for NNN assets rose 18% year-over-year in the third quarter of 2025. This marks the third-highest annual transaction activity on record in the sector.
### Driving Forces Behind the Surge
In a video presentation titled “What’s Driving the Rebound in Net Lease Transaction Activity,” Chang explored several factors fueling renewed investor demand for NNN properties.
#### Tax Incentives
A major catalyst has been recent changes in tax law. In July 2025, President Donald Trump signed H.R. 1 into law, restoring 100% bonus depreciation for assets acquired and placed into service after January 19, 2025. This provision covers not only equipment and fixtures but also real estate assets.
Previously, bonus depreciation had tapered—from 80% in 2023 to 60% in 2024. The reinstated full deduction allows investors to significantly offset taxable income, enhancing the appeal of NNN investments, which also benefit from low operational responsibilities and stable cash flows.
#### Cap Rate Differentials Indicate Market Segmentation
Cap rates—used to measure the return on real estate investments—differ based on tenant quality, lease structure, location, and remaining lease term. According to Chang:
– Properties with high-credit tenants generally trade at cap rates in the mid-5% range.
– Mid-tier tenant properties are seeing cap rates in the high 6% range.
– Properties with lower-tier credit tenants typically trade in the 7% range.
Lower cap rates point to lower perceived risk and potential for stronger value appreciation and rent pricing power.
#### 1031 Exchanges Provide a Path for Private Investors
Private investors have become a dominant force in NNN acquisitions, accounting for 64% of all purchase activity in the past year. Institutional buyers and REITs, by contrast, have decreased their activity.
Many of these private investors are leveraging 1031 exchanges—a tax-deferral strategy that allows them to sell more management-intensive properties and reinvest in NNN leases as part of retirement and estate planning. The strategy enables deferral of capital gains and depreciation recapture taxes while reducing ongoing management burdens.
Chang emphasized the importance of consulting with a tax advisor before pursuing a 1031 exchange but highlighted the benefits of migrating into simpler real estate portfolios with consistent returns and minimal day-to-day oversight.
As the commercial real estate market evolves, investor enthusiasm for NNN properties is expected to remain strong, driven by favorable tax policies, steady income potential, and strategic portfolio reallocation through 1031 exchanges.
