Respondents are tracking a variety of issues that could present market opportunities and challenges ahead. The possibility of rising interest rates, cap rate compression and 1031 money that is “too eager” to buy replacement assets are concerns that are top of mind for some survey participants. “The market is overdue for a correction, which has already affected the residential market in NYC, and NYC is typically a leading market indicator,” wrote one respondent.
One concern is the proliferation of new and unproven investors in the net-lease sector that may not have the experience or financial strength to be able to withstand potential downturns, notes Sabatini. “The need to sell or refinance when markets are down could be unsettling for them and potentially the larger net lease space,” he says.