Retail, Industrial, & Investment Property Advisor

For many investors either starting off in the retail asset class, or an experienced investor moving from other asset classes, such as Multi-Family, retail shopping centers and single-tenant net lease (STNL) assets are attractive options. These properties often promise stable income streams with brand-name tenants and minimal management responsibilities. But before investing, it’s critical to understand the distinction between an Absolute Net Lease (Absolute NNN) and a traditional Net Lease (NNN) asset — and how each structure can impact risk, return, and long-term investment strategy.

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Defining the Lease Types

Absolute Net Lease (Absolute NNN)

• The tenant is responsible for all expenses associated with the property — taxes, insurance, maintenance, roof, structure, parking lot, everything.
• In many cases, these are ground leases, where the investor owns the land, and the tenant has built and operates their own building.
• Common examples: McDonald’s, Starbucks, Raising Cane’s, Fedex distribution facilities, and government-leased properties.

Traditional Net Lease (NNN)

• The tenant typically pays for taxes, insurance, and maintenance (the “triple nets”), but the landlord may still have responsibility for certain capital items like roof and structure.
• These are often build-to-suit or second-generation retail buildings where the tenant occupies and pays rent directly on the building.
• Common examples: AutoZone, O’Reilly Auto Parts, Amazon distribution facilities,  Dutch Bros., Chase Bank, and many single-tenant inline retail or pad site users.

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Pros and Cons of Absolute NNN Assets

Pros:

• Truly passive ownership – no landlord obligations.
• High-credit tenants on long-term leases (often 20–30 years).
• Predictable income stream with little risk of unexpected expenses.
• Ground lease strength – investor owns the land and often receives the improvements at lease expiration.

 Cons:

• Lower rent levels compared to building leases (ground rent vs. building rent).
• Longer lease terms often mean fewer rent increases.
• Inflation hedge is weaker – escalation clauses are typically modest (1.25% annually or 7.5% every 5 years).

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Pros and Cons of Traditional NNN Assets

Pros:

• Higher rents than ground leases, since tenants are paying for both land and building use.
• More frequent rental increases tied to inflation or market rent adjustments. Typically 2% annually or 10% every 5 years.
• Broader tenant pool including retailers, auto parts stores, industrial/logistics companies, and service providers.

Cons:

• Landlords may still have residual responsibility for capital repairs (roof, structure, parking lot).
• Management involvement is greater than Absolute NNN, though still far lighter than multifamily.
• Re-leasing risk can be higher if tenant vacates, especially if the building is specialized or in a secondary location.

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But wait… There is more than just NNN vs Absolute NNN.

Credit vs. Location: The Bond-Like Nature of STNL Investments

Traditional real estate wisdom emphasizes the “golden rule”: location, location, location. For most multifamily, retail center, or office investments, location drives tenant demand, rental rates, and long-term appreciation.

But with single-tenant net lease (STNL) assets, especially Absolute NNN ground leases, the investment dynamic is different. These properties often function more like a corporate bond than a traditional real estate play. Why?

• Income is secured by the tenant’s creditworthiness, not just the property’s physical location.
• An investor is essentially betting on the financial strength and reliability of the tenant (e.g., Starbucks, McDonald’s, Chase Bank, FedEx, Amazon).
• The landlord’s role is minimized, since rent flows consistently as long as the tenant remains solvent and committed to the lease.

In this sense, creditworthiness can outweigh location:

• A McDonald’s on an average corner in a secondary market with a 20-year absolute NNN lease guaranteed by McDonald’s Corporation may present a safer, bond-like investment than a prime-location building leased to a regional tenant with weaker credit.
• Buyers should underwrite not only the dirt but the tenant’s balance sheet — looking closely at lease guarantors, corporate backing, and credit ratings.

That’s not to say location is irrelevant. A strong site can enhance residual value if a tenant leaves. But for many 1031 exchange buyers seeking predictable cash flow and minimal management, the tenant’s credit quality becomes the #1 driver of investment security.

Which Is Right for a 1031 Buyer?

For investors coming out of multifamily properties, the choice often depends on your investment goals:

• If you want a hands-off, bond-like investment with minimal landlord responsibility, an Absolute NNN ground lease with a tenant like Starbucks, McDonald’s, or Chase Bank may be ideal.
• If you’re seeking higher cash flow and better inflation protection, a traditional NNN lease with a tenant like AutoZone, O’Reilly, or an Amazon/FedEx logistics facility may better align with your objectives.

Both strategies provide diversification outside of multifamily, backed by strong national or regional tenants, and can be a smart use of 1031 exchange dollars. Retail assets offer a unique tenant-landlord relationship, where landlords have limited responsibilities to the tenant, less regulatory oversight, and long term lease structures.

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Final Thoughts

Absolute NNN and traditional NNN assets both serve as powerful tools for building a stable, long-term retail portfolio. The key is matching the asset type to your personal investment profile — whether you value ultra-passive stability (Absolute NNN) or higher income with modest landlord involvement (NNN).

By carefully weighing the trade-offs, you can confidently transition into retail ownership and leverage the benefits of strong-credit tenants like Starbucks, Dutch Bros., McDonald’s, Raising Cane’s, Chase Bank, AutoZone, O’Reilly Auto Parts, FedEx, and Amazon to secure durable income for years to come.