Net Lease Investing Expands Across Sectors as Capital Deepens

The net lease market is entering a new phase of growth and specialization, driven by evolving investor demand, sector-specific expertise and increasing institutional participation. As capital continues to flow into income-oriented real estate strategies, platforms with scale and transaction visibility are gaining a clearer view into where pricing, demand and asset preferences are shifting.

Nicoletti DePaul, COO and Senior Managing Director of SURMOUNT, sits at the center of that activity. The firm’s 2025 business recap, highlighted by $3.9 billion in transaction volume across 1,250 deals spanning 46 states, offers a snapshot of a market being shaped by both traditional net lease sectors and emerging niches like automotive services. With a dominant position in segments such as car wash transactions, SURMOUNT provides a unique lens into how investors, operators and private equity sponsors are positioning for the next cycle.

CM: From your vantage point, how would you characterize the current state of the net lease market as we approach mid-year?

ND: We’re seeing modest volume increases, and cap rates have been relatively stable without dramatic movement in either direction. We’re observing a bit of an imbalance, where institutional buyers have far more appetite than available product, while private buyers are showing incremental improvement but still haven’t returned to the activity levels we saw between 2017 and 2022.The M&A and sale-leaseback markets have been fairly flat over the past two years.

Much of the headline M&A activity has been concentrated in tech, public companies, and large-cap deals which are segments that typically don’t pursue sale-leaseback structures. On the financing side, the cost of capital hasn’t decreased much but availability has improved compared to the last three years. Looking ahead, we’re anticipating significant momentum in sale-leaseback volume during the second half of the year. Middle-market sponsors will face pressure to deploy committed capital and exit legacy investments to return capital to investors and close out vintage funds, creating momentum.

CM: Investor demand appears to be shifting – what property types are seeing the strongest interest today, and why?

ND: We’re seeing interest across several sectors. The automotive sector has been particularly attractive, driven by recession resilience, strong unit-level performance and meaningful bonus depreciation benefits. Middle-market industrial assets are also getting significant attention because of improved debt availability and yields that are more palatable for investors. There’s also an interesting succession trend playing out here: many business owners are reaching retirement age and selling rather than passing the business to the next generation. Early childhood education is another area of growth, with demand shifting from traditional public education models.

But the most notable evolution is in multi-unit healthcare. The private investor market has not historically been as active in the space, and we’re seeing that shift in real-time as investors recognize the opportunity and actively educate themselves on the space. This is creating strong demand for product that’s always existed but previously went almost exclusively to institutional buyers.

CM: SURMOUNT has a significant share of the car wash transaction market. What is driving investor appetite in that segment specifically?

ND: Three factors are converging to sustain interest in car wash assets. First, bonus depreciation is back to 100%, and car washes are highly efficient vehicles for capturing these tax benefits. Second, the market has found better equilibrium. After a period of rapid expansion that created some oversupply concerns, growth has normalized and things have settled down. Third, the fundamentals remain strong, as unit-level performance and cash flow coverage ratios continue to demonstrate the operational strength of well-positioned assets.

CM: What are you hearing from operators on the ground – are sale-leasebacks still an active source of capital, or has that slowed with higher cap rates?

ND: The cooldown was in new store development and M&A transactions, as opposed to sale-leaseback transactions as a source of capital. In fact, with leverage availability down by multiple turns compared to previous years, sale-leasebacks have become more prevalent than ever as operators seek alternative capital solutions. We’re now seeing development activity pick back up. Many operators are self-developing new locations and immediately executing sale-leasebacks upon completion, effectively using this structure as a core component of their growth strategy.

CM: How are private equity sponsors using net lease structures as part of their broader capital stack for platform and add-on acquisitions?

ND: Net lease structures have become increasingly central to private equity capital strategies, representing a larger portion of the capital stack than in recent memory. We’re seeing substantial activity in both built-to-suit and reverse built-to-suit transactions, which sponsors are using to fund expansion and increase unit count across their platforms. This shift is partly driven by necessity, as debt availability to operating companies has declined by 25% to 50% compared to what sponsors could access in previous years. We expect this trend to intensify through the rest of the year as they continue navigating this constrained debt environment.

CM: Are lease terms and covenants changing in a noticeable way as sponsors and lenders push for more protection?

ND: Not in particular. Structural fundamentals have remained consistent, although we have seen an emphasis on rental escalations due to inflation and modification in credit enhancement mechanisms around guarantee provisions. Beyond that, we’re seeing relative stability in covenant structures.

CM: With so much focus on single-tenant risk, how are investors thinking about credit quality versus real estate fundamentals in today’s market?

ND: It varies by investor, but we’re definitely seeing a shift toward real estate quality. Investors are applying greater scrutiny to underlying real estate characteristics by analyzing rental rates relative to price per square foot and micro-market dynamics. That said, credit quality still matters, and pricing continues to adjust accordingly. The evolution is really about investors becoming more sophisticated in their evaluation, weighing tenant credit alongside real estate fundamentals rather than relying on either factor in isolation.

CM: Looking ahead, what are the biggest opportunities and, potential headwinds, for the net lease market over the next 12–24 months?

ND: There are a few factors that I believe will shape market trajectory over the coming months. Interest rate movements will continue influencing private investor participation and return expectations. Product supply will likely be determined by M&A volumes, and there’s a growing sense that activity has to accelerate as sponsors need to deploy committed capital while simultaneously exiting positions to close out funds and return capital to investors.

Industry-specific dynamics will create both opportunities and challenges within particular segments, though that’s true for any real estate sector. For example, debt maturities are approaching across the market. Borrowers will be forced to respond by either paying down debt or selling, which will impact product availability and create investment opportunities for those with available capital.