Reduced 1031 exchange capital, reticence of institutional buyers to pull the trigger on acquisitions and rising borrowing costs have combined to cause single-tenant net lease sales volume to experience a larger decline than all asset types together.

In 2022, the investment sales total for single-tenant net lease properties slumped 25% compared to 2021 — much more than the 15% year-over-year decline in all asset transactions overall, a Colliers report released Tuesday found.

The volume of sales for single-tenant net lease properties fell every quarter in 2022, and the second half of the year saw just 48% of the number of sales clocked in the same period of 2021.

However, 2021 was a hard act to follow. Fueled by demand for industrial properties of this type, the investor appetite for these properties surged in 2021, Colliers said.

While the market has cooled from the highs of 2021 and the first half of 2022, when deal volume reached an “all-time high” of $40.1B, “it is reverting to the mean,” the report’s authors wrote.

Industrial single-tenant net lease volume fell 23% in 2022, more than all industrial real estate's decline of 15%, Colliers said. The brokerage was still bullish on these properties, citing the still-active buyer pool, including institutional capital, which bought more of these assets in 2022 than in the previous year.

Single-tenant net lease properties have, in the past, been seen by many investors as a stable asset that is especially attractive in times of economic uncertainty.