Single-tenant net lease properties—also known as triple net lease (NNN) assets—date back to the post-World War II era. Several decades later, “single tenant net leased properties like car washes, convenience stores, quick-service restaurants and auto service centers have become increasingly popular with investors,” said John Chang, Marcus & Millichap’s Senior Vice President.
According to figures released by Marcus & Millichap, transaction velocity for the assets increased year-over-year by 18% in Q3 2025, generating the third-highest annual transaction activity on record.
In a recent video entitled “What’s Driving the Rebound in Net Lease Transaction Activity,” Chang discussed multiple factors contributing to the ongoing interest in these investments.
Tax Laws
President Donald Trump signed H.R. 1—the tax bill—into law in July 2025. Amid the key provisions was the restoration of 100% bonus depreciation for assets purchased and placed into service after January 19, 2025. Eligible property includes equipment, fixtures—and real estate.
According to Chang, the bonus depreciation rate stepped down to 80% in 2023 and then to 60% in 2024. The permanence of bonus depreciation, as well as the minimal maintenance requirements, means NNN real estate properties continue to be in high demand.
Cap Rates
Chang acknowledged that cap rates on single tenant properties can vary, based on the asset’s location, remaining term, age, lease bumps and extensions.
Cap rates on NNN assets with high creditworthy tenants have been in the mid-5% range. Properties leased to mid-tier tenants trade in the high 6% range, while the cap rate for properties containing lower-tier credit tenants is in the 7% range.
While multiple factors impact cap rates, lower numbers suggest higher appreciation potential, strong pricing power for rent rates and a perceived lower risk.
Exchange Fodder
Private investors tend to dominate the acquisition of NNN assets. On the other hand, the buying activities of institutional investors and REITs in the space have decreased.
Chang noted that private investors made up 64% of the purchase activity within the last year and “many of those investors have leveraged 1031 exchanges to exit more management-intensive commercial real estate as part of their retirement and estate planning processes.”
The approach enables investors to roll their adjusted basis from the sale of their relinquished property into the replacement asset, thereby deferring capital gains and depreciation recapture taxes in the process. They also eliminate the operational and maintenance headaches associated with other property ownership.
Chang suggested that investors talk to their tax advisors regarding the use of a 1031 exchange, adding that migrating from management-intensive properties into easier-to-operate NNN assets “can be a great way to scale down the management needs of a real estate portfolio.”
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