**Investors Continue Flocking to Net Lease CRE Assets Amid Tax Changes and Stability**
Single-tenant net lease (NNN) properties have held investor interest for decades, tracing their origins back to the post-World War II era. Today, properties such as car washes, convenience stores, quick-service restaurants, and auto service centers are increasingly sought after by investors.
According to John Chang, Senior Vice President at Marcus & Millichap, interest in these property types remains strong, with transaction velocity rising 18% year-over-year in the third quarter of 2025. This marks the third-highest annual transaction activity on record for the asset class.
### What’s Behind the Surge?
In a recent video segment titled “What’s Driving the Rebound in Net Lease Transaction Activity,” Chang highlighted several contributing factors to the increased demand for NNN assets, including tax incentives, favorable cap rates, and investor strategies involving 1031 exchanges.
### Tax Incentives Fuel Investment
One of the major tailwinds has been recent tax legislation. In July 2025, President Donald Trump signed H.R.1 into law, restoring 100% bonus depreciation for assets purchased and placed into service after January 19, 2025. This significant financial incentive allows investors to deduct the full value of eligible real estate assets—such as equipment and fixtures—upfront for tax purposes.
Previously, the bonus depreciation rate stepped down from 100% to 80% in 2023 and then to 60% in 2024. This recent change re-energizes interest in asset acquisition and investment in NNN properties, which tend to have minimal operating and maintenance responsibilities.
### Cap Rates Remain Attractive Across Credit Tiers
Cap rates continue to be a key consideration for investors. Chang noted that the rates vary depending on factors such as tenant creditworthiness, lease term, and location. NNN assets leased to tenants with strong credit typically yield cap rates in the mid-5% range. Those with mid-tier tenants come in higher at around 6%, while lower-tier credit tenants fetch cap rates in the 7% range.
Generally, a lower cap rate implies higher potential for property appreciation, stronger pricing power in rental negotiations, and lower perceived investment risk.
### Private Investors Drive Demand
Private investors dominate acquisition activity in the NNN sector, accounting for 64% of purchases over the past year. In contrast, purchases by institutional investors and REITs have declined.
Many private investors are leveraging 1031 exchanges to transition from management-intensive commercial real estate into NNN assets. These exchanges allow them to defer capital gains and depreciation recapture taxes by rolling the adjusted basis of a sold property into a new investment. The shift often aligns with retirement and estate planning goals and reduces management burden.
Chang advised investors to consult with tax professionals when considering a 1031 exchange, emphasizing that transferring into NNN properties can significantly reduce the complexity and labor associated with property management.
In summary, the combination of favorable tax incentives, attractive cap rates, and ease of management continues to drive momentum for NNN assets in the commercial real estate sector. As investors seek both stability and long-term value, the net lease market remains a pivotal part of their portfolio strategy.
