There are different types of nnn properties you can invest in. The most common are retail, office and industrial. There are also triple net leases for educational facilities, hotels, health care facilities, apartment buildings and even undeveloped land. In this section I will break down the most common types. This category is broken down by several types of businesses, here are the most common:
Big Box Stores
Typically referred to as large discount retailers such as Walmart, Best Buy, Target, Costco and Kohl’s. Most of these types are public companies backed by multi-million dollar infrastructures. Typical architectural characteristics include the following:
Large, free-standing, rectangular, generally single-floor structure built on a concrete slab. The flat roof and ceiling trusses are generally made of steel, and the walls are concrete block clad in metal or masonry siding. Floor space several times greater than traditional retailers in the sector, providing for a large amount of merchandise; in North America, generally more than 50,000 square feet, sometimes approaching 200,000 square feet though varying by sector and market.
Commercially, big-box stores can be broken down into two categories: general merchandise (examples include Walmart and Target), and specialty stores (such as Barnes and Noble, or Best Buy) which specialize in goods within a specific range, such as hardware, books, or electronics. Typically a big box store lease ranges from 10 to 20 years and have a high chance of lease renewal.
Most will be familiar with these chains like CVS, Walgreens, Rite-Aid. These tenants usually demands premier hard corner locations and have serve a growing baby boomer population. Along with retail sale of prescription and non-prescription drugs they also sell front-store products such as beauty care, personal care, household items, candy, photofinishing, greeting cards, convenience foods and seasonal items, as well as liquor and tobacco where permissible by law. New drug store leases are typically 20 years or more with varying lease structures that can range from 50 year lease renewals or even 75 year leases.
Restaurants are another very popular category for investors because the vast majority of restaurants operate under a triple net lease structure. The current retail sector is very attractive right now. Nationally, the retail market vacancy rate decreased from 6.9 to 6.7 percent in second quarter of 2013 on the strength of more than 23.1 million sq. ft. net absorption, according to CoStar, a commercial real estate research firm. Rental rates were up 2 cents at the mid-year mark to $14.50 psf. Consumer confidence has also reached its highest level since 2007. Additional research support this as well. According to NDP Group a consumer market research firm, the total volume of restaurants in the United States increased by 0.5 percent in 2013, which is 3,045 units in the year. Quick-service restaurants rose by 1 percent to 328,162 units. Convenience stores experienced a 2 percent gain in consumer traffic, which led to a year-over-year increase of nearly 6 percent in dollars, reported NPD in June. New leases can range from 10 to 20 years but on average 20 years with varying rental increases.
Continue to Part 2 of Types of NNN Properties you can invest in
Below are a short list of available NNN Properties you can invest in. For a full list contact us directly
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Dwaine Clarke is a published author and founder of Clarke & Tinker Net Leased Property Group, a commercial real estate sales and advisory firm located in Connecticut. Connect with Dwaine on Twitter and Linkedin