Common NNN Lease Tenants

An NNN lease, also known as a triple net lease or sometimes referred to simply as a net lease are common among retail corporations and franchisees. NNN leases are most common in retail properties but they do occur in other product types. Tenants that occupy net lease real estate can range from a small stand-alone coffee stand at one end of the spectrum all the way up to a Super Walmart at the other end. Most properties that are purchased by net lease investors range somewhere in between the two extremes. Our on market NNN properties can be found here.

NNN Lease Tenants by Industry

The following tenants are an example of tenants who occupy real estate under an NNN lease. This list is being used to demonstrate the variety of tenants in the NNN lease retail sector. In addition to large corporations, small businesses also rely on NNN leases, therefore this list is far from exhaustive.

Auto Parts Stores:

AutoZone, O’Reilly Auto Parts and Advance Auto are the big three in the auto parts category. At the time of this article, all three corporations are rated investment grade by Standard & Poor’s. Due to their strong credit ratings, properties occupied by AutoZone, O’Reilly Auto Parts and Advance Auto are highly sought after by investors.

Drug Stores:

Walgreens, CVS and Rite Aid all use NNN leases to secure their retail locations. Walgreens and CVS are investment grade tenants. Due to strong financials and a business model that is more resistant to changes in consumer purchasing trends than other retailers, Walgreens and CVS are considered extremely strong tenants. Rite Aid has struggled in the past but is rebounding quite nicely. As a result, positive sentiment is growing amongst investors. A more detailed report about Rite Aid can be found here.

Banks:

Bank of America, Chase, Citi, and Wells Fargo are the most common NNN lease banks purchased by investors. Banks are notorious for staying in a location for long periods of time. Their long term prospects combined with their corporate strength appeal to investors. Similar to all investment real estate, banks are not without risks. Recent evolutions in online banking have caused periods of uncertainty. Yet, physical banks are still demanded by consumers so they will continue to be prominent for the foreseeable future.

Discount Stores:

Dollar General, Family Dollar, Dollar Tree and 99 Cent Stores make up the bulk of discount store properties on the market. Tightened consumer spending during the great recession lead to an environment where discount stores thrived. New construction of discount stores increased and transaction volume for NNN lease property occupied by discount retailers increased significantly.

Fast Food:

It is very common for real estate occupied by most large fast food chains to be owned by private investors. In some situations, franchisees will own the real estate and other times an investor who has nothing to do with the business will own the real estate and lease it to the company under a NNN lease. Arby’s, Taco Bell, Wendy’s, Del Taco, KFC, A&W, Jack in the Box, Carl’s Jr. and Burger King are examples of fast food chains who lease real estate. McDonald’s and In-N-Out are two large chains that typically own their own real estate. I can’t recall seeing an In-N-Out that wasn’t corporate owned, but there may be one out there somewhere. Fee simple McDonald’s are rare. Most McDonald’s that trade are ground leases.

Day Cares and Private Schools:

Tutor Time, KinderCare, Children’s Creative Learning Center, Merryhill and La Petite Academy are common tenants in the day care and private school sector. Cap rates for day cares and private schools are typically higher than properties occupied by “traditional” NNN lease tenants. As cap rates have compressed, day cares and private schools have gained attention from investors who have overlooked them in the past. This CoStar article talks more about the trends we’ve been seeing.

Restaurants:

Chevy’s, Red Robin, Outback, Applebee’s, Chili’s and Buffalo Wild Wings are all examples of NNN lease restaurants that investors buy and sell. Generally speaking, restaurants offer higher returns than auto parts stores, drug stores, and fast food restaurants.

Our Market Research page offers detailed information about specific tenants and can be found here. Contact us with any questions about nnn lease properties or tenants.