Net leased real estate continued to attract investor attention in the first quarter of 2020. According to the latest report from commercial real estate services and investment company CBRE Group (CBRE), Net-lease investment volume increased by 34.6% to $78.9 billion from the first quarter of 2019 to the first quarter of 2020. That is the highest increase on record, according to CBRE. While volumes may decline in the second quarter due to the economic shut down caused by the COVID-19 pandemic, investors are still clearly favoring this asset class.

What’s Happening with Net Leased Real Estate?

Washington, D.C. was the most-favored investment market in Q1, while New York City, Los Angeles, and San Jose had the most volume over the past four quarters. Investors also were increasingly attracted to net-lease investment opportunities in high-growth secondary and tertiary markets, with some of the most significant four-quarter percentage gains occurring in Kansas City, the Inland Empire, San Diego, Austin, Indianapolis, and Cincinnati.

Industrial net-lease properties are attracting the most attention among net-lease property types. Investments in industrial properties grew by 14% compared to the year-ago quarter. As expected, retail properties continue to decline in popularity as the combination of e-commerce and the pandemic related shutdown continue to drive investors away from retail properties.

Office net-lease properties also declined as investment volumes declined by 8.5% compared to last year. Investors will be watching this sector closely to see what long term impact of work from home will be on net leased office space.

Net-Leased Real Estate Investment Trusts have also attracted investor attention since the beginning of the current crisis. Many net lease REITs have recovered much of the ground lost in the March sell-off. Several net-lease REITs, including W.P. Carey (WPC), Spirit Realty Capital (SRC), Essential Properties Realty Trust (EPRT), and Four Corners Property Trust, have seen strong buying corporate insiders as the pandemic initially drove prices lower.

The CBRE report made it clear that investors are not just turning to triple net lease properties in the United States in the search for yield. Cross-border investments in net-lease properties increased by 38.7% from the same period a year ago. Canada, Germany, Spain, and Switzerland have been the top countries for inbound capital over the past two years, according to CBRE.