October 23, 2018

As Multifamily Rents Soften, Investors Turn To Net-Lease Assets

New York City multifamily rents continue to soften. In June, the median asking rent for a one-bedroom apartment dropped 3.1% compared to last year, and fell 15.1% from its peak in March 2016, Business Insider reported. Investment sales have also slowed across multiple asset classes, down 50% from the peak of the market in 2015.

The slowdown has prompted many investors to turn toward net-lease properties. Net-lease assets are properties for which tenants pay the taxes, insurance fees and maintenance costs instead of the landlord, in addition to rent. Already in high demand and short supply, net-lease offers investors steady returns on investment and a hands-off approach to management. “The main motivations [for net-lease assets] are stability, long-term predictable returns and a lifestyle change,” Marcus & Millichap broker Karly Iacono said. “We are seeing tenants trade out of assets that have softened in the New York Tri-State area, like multifamily, into net-lease properties throughout the country to increase their cash flow and diversify both through product type and market. They are no longer involved in the property and are getting those predictable returns without fluctuations in their rent rolls.”