Colorado-Real-Estate-Journal_536826

Page 24 - July 1-14, 2026 www.crej.com Net-lease Investing 2401 E 2nd Ave, Suite 600 Denver, CO 80206 SELF STORAGE PORTFOLIO TERM LOAN LIFE COMPANY $20.3M IDAHO INDUSTRIAL TERM LOAN LIFE COMPANY $20.4M Essex is the largest independently-owned commercial mortgage banking rm in Colorado. L e t u s f i n d t h e f i n a n c i n g s o y o u c a n e x e c u t e y o u r b u s i n e s s p l a n . 3450 N NEVADA BRIDGE LOAN BANK $5.3M www.essexreca.com Carma Weymouth VP, Division Manager 303.780.4015 cweymouth@stewart.com April Knott VP, Business Development Of cer 303.875.7565 april.knott@stewart.com We invest in the technology, skill and resources to navigate your commercial transaction. Combining our local market expertise with international reach, we take a customized, trusted partner approach. Contact us to learn more. © 2023 Stewart. All rights reserved. Solutions that Span Your Transaction Across Town. Across the Globe. C ommercial real estate investors have become sig- nificantly more selective in how they deploy capital. Elevated bor- rowing costs, refinancing pressure, and broader economic uncertainty have shifted attention away from speculative growth strategies and toward assets that can provide durable income and operational simplicity. As a result, net-leased properties continue to attract inter- est from private investors, family offices and 1031 exchange buyers seeking stability in an evolving market environment. The appeal of net-leased invest- ments is not new. What has changed is the market backdrop. Deloitte's 2026 Commercial Real Estate Outlook notes that elevat- ed interest rates, macroeconomic volatility, and policy uncertainty continue to temper the pace of commercial real estate recovery. Those conditions are influencing how investors evaluate risk, ten- ant quality and long-term cash flow durability. For Colorado commercial real estate stakeholders, the trend is particularly relevant. As investors reassess portfolio composition and acquisition criteria, net-leased assets are increasingly being eval- uated not simply by cap rate, but by the strength of the underlying tenant, lease structure, and long- term market fundamentals. n Income stability has become a competitive a d v a n t a g e . One of the pri- mary reasons investors con- tinue to evalu- ate net-leased properties is the potential for more pre- dictable income streams. In many net lease structures, ten- ants are responsible for some or all operating expenses, including taxes, insurance and maintenance obligations. Depending on the lease terms, this can reduce own- ership complexity and improve visibility for future operating costs. That distinction has become increasingly important in a higher- interest-rate environment. When debt costs rise, investors often place greater emphasis on cash flow reliability. Assets that can demonstrate stable occupancy, long-term lease commitments, and clearly defined expense obli- gations frequently receive closer consideration than properties dependent on short-term leasing assumptions or significant future repositioning. This does not mean inves- tors have abandoned value-add opportunities. However, many buyers are now scrutinizing risk- adjusted returns more carefully. Long-term income visibility has become a mean- ingful compo- nent of acquisi- tion decisions. n Tenant credit and busi- ness funda- mentals mat- ter more than asset type. Another nota- ble shift is the increasing focus on tenant qual- ity rather than property category alone. Historically, investors often grouped opportunities by retail, medical office, office or industrial classifications. Today, many are evaluating whether the tenant's business model supports long- term occupancy and operational necessity. Several CRE industry seg- ments continue to attract inves- tor attention, including medical office users, automotive service operators, convenience-oriented retailers, quick-service restaurants, industrial service providers, logis- tics companies, and established professional service firms. The common characteristic is not the building type. It is the tenant's ability to generate ongo- ing demand for its services, which improves the likelihood of paying rent for the full lease term and wanting a lease renewal. For example, a well-positioned medical office facility serving a growing community may present a different risk profile than a tradi- tional office property dependent on discretionary leasing demand. Similarly, industrial properties occupied by service contractors or distribution users may benefit from operational requirements that make relocation costly or dis- ruptive. As a result, investors increas- ingly evaluate tenant financial strength, operational importance, local market position, and lease duration alongside traditional real estate metrics. n 1031 exchange buyers continue to support demand. Net-leased properties also remain attractive to 1031 exchange inves- tors. Many owners who sell actively managed commercial properties seek replacement assets that pro- vide fewer management respon- sibilities, longer lease terms and simpler ownership structures. These investors often prioritize predictable income streams and reduced operational oversight when identifying 1031 exchange replacement properties. Because exchange deadlines are inflexible, well-positioned net- leased assets can attract significant attention from buyers operating under these strict IRS mandated acquisition timelines. However, sophisticated inves- tors continue to look beyond marketing materials and headline cap rates. Remaining lease terms, renewal options, rent escalation provisions (that keep up with inflation), property conditions, and future marketability all play important roles in determining long-term investment perfor- mance. The lesson for investors is straightforward: A recognizable tenant name alone does not auto- matically create a strong invest- ment opportunity. Real estate fun- damentals still matter. n Secondary markets are receiving greater consideration. The search for yield and long-term growth has also encouraged some investors to look beyond tradi- tional gateway markets. Investors continue evaluating secondary and tertiary markets because of factors such as lower acquisition costs, potentially high- er cap rates, population growth trends, business migration pat- terns and relative affordability. Colorado provides several examples of this trend. While major metropolitan areas contin- ue attracting investment capital, smaller growth-oriented com- munities have received increased attention from buyers seeking stronger yields and long-term demographic tailwinds. Net-lease investing: Capital still favors predictable cash flow Justin Rayburn Principal, Fountainhead Commercial Lowrey Burnett Principal, Fountainhead Commercial Please see Rayburn, Page 29