The 15 Best NNN Investments for 2023
If you’re looking for a long-term, stable investment that can offer you reliable, consistent cash flow, look no further. For commercial real estate investors in search of a secondary revenue stream or increased passive income, these top-tier NNN lease tenants are highly appealing. No matter where you’re located, there are options for NNN properties nationwide.
In this comprehensive guide, we’ve detailed the top 15 triple net lease tenants that you can use to build the commercial real estate portfolio of your dreams. Getting your hands on properties that can support these investment-grade tenants now is an excellent way to establish recurring income well into the future.
The 15 Best NNN Investment Tenants
When it comes to investing in commercial real estate, these tenants are the biggest, best names to consider. They all offer NNN leases, a type of commercial leasing structure that reduces landlord responsibility by passing off nearly all costs (such as property insurance, maintenance, structural repairs, and more) to the tenant.
If you’re looking to establish a lucrative venture that will keep on paying out over the long term, these NNN tenants may be just what you’ve been searching for.
As the second-largest retail pharmacy chain in America, CVS operates in a stable pharmaceutical sector that’s often considered to be recession resistant.
The average sale price for a CVS is $6,000,000, and the building’s size generally falls between 8,000 and 15,000 square feet. CVS prefers large lots of one to four acres and offers long leases with terms of up to 20 or even 25 years.
With a credit rating of BBB from S&P Global Ratings, CVS is an investment-grade tenant. Its cap rate falls at 4.8%, meaning it’s a stable investment that should continue to pay out for the foreseeable future.
With a variety of locations in primary, secondary, and tertiary markets, McDonald’s remains the premier brand in the quick-service restaurant (QSR) space. The business has high credit, rated as BBB+ by S&P Global Ratings. They offer long-term leases for 20 years that come with a 10% escalation every five years.
The average sale price of a McDonald’s property is $2,730,000 and takes up 4,500 square feet on a lot sized between 0.75 and 1.25 acres. The brand prefers highly trafficked areas with easy ingress and egress and room for a drive-through. McDonald’s does have a lower cap rate at 3.9%, but this speaks to the brand’s stability.
Some FedEx leases are NN leases rather than NNN leases, so it’s important to check the specifications of your exact property. But for their NNN leases, FedEx is excellent at choosing premier locations and offers lease terms between 5 and 15 years. Depending on the type of property (store or hub), locations vary greatly in both size and price.
FedEx is a publicly traded company on the New York Stock Exchange and has a credit rating of BBB from S&P Global Ratings. Its cap rate is an attractive 6.0%.
Offering a lower price point that matches its tertiary market locations, Dollar General is an excellent way to get into the world of commercial real estate. Its price-motivated target market considers the store essential retail, meaning that it’s nearly recession-proof. The store prefers locations with high visibility, easy access, and plenty of room for parking (at least 30 spaces).
The average sale price of a Dollar General location is $1,925,100. Its locations take up about 9,000 to 10,000 square feet on a one-acre lot. With lease terms between 10 and 15 years that include variable escalations, Dollar General is an attractive option for many investors. Plus, its 5.1% cap rate means that you can expect solid returns.
A retailer and distributor of auto parts and accessories in the U.S. It’s a strong net lease asset because of the corporate guarantee that comes with each lease, lowering landlord risk. While AutoZone does offer some NN leases, its NNN leases AutoZone free the landlord from maximum responsibility. With a 4.45% cap rate, AutoZone is a fairly stable investment.
The average sale price for an AutoZone location is $2,145,800 for a 7,000- to 8,000-square-foot building on a lot of 0.5 to 1.5 acres. The lease terms are usually 15 years with 10% escalations every five years. AutoZone has a credit rating of BBB from S&P Global Ratings.
With corner locations and long absolute NNN leases, Walgreens is a premier commercial real estate tenant operating in a stable sector with an attractive 5% cap rate. Its locations are typically around 14,500 square feet and cost an average of $6,000,000 to purchase. They sit on lots around 1.8 acres.
Walgreens has an attractive credit rating of BBB from S&P Global Ratings. It’s also a public company traded on the Nasdaq under the stock symbol WBA, so its finances will always be transparent and accessible.
With a corporate guarantee, a strong credit score, and high visibility, Walmart is an attractive NNN lease tenant that essentially creates a new commercial hub wherever it opens. It has a cap rate of 5% and a very strong credit rating of AA according to S&P Global Ratings.
Walmart offers three different store plans, meaning that the average sale price, building square footage, and lot size of its locations vary greatly. But that also means you have options in terms of what level you want to invest in.
The leading provider of kidney care in America, DaVita is a business focused on administering dialysis to patients. This is a growth sector in the medical industry as kidney disease rates are expected to rise. DaVita is a Fortune 500 Company with a credit rating of BB- from S&P Global Ratings. It has a cap rate of 4.89%.
The average sale price of a DaVita location is $3,793,100. Square footage can range from 6,000 to 12,000 square feet and the buildings can sit on lots sized between 1.0 and 2.5 acres.
With a low price point, a mix of NN and NNN leases, and tertiary market locations, Family Dollar is a good pick for investors looking to get into the world of commercial real estate. The company is a chain of discount retailers that now falls under the Dollar Tree umbrella. The average building size is between 6,000 and 8,000 square feet.
Family Dollar stores typically sit on lots around 0.5 to 1.5 acres in size and cost an average of $1,547,900 to purchase. The lease term for Family Dollar is generally 15 years, and its cap rate clocks in at 5.75%.
A QSR dedicated to Mexican-inspired fast food, Taco Bell franchises most of its locations, meaning that cap rates can change based on the size and strength of the operator at each individual location. On average, Taco Bell’s cap rate is 4.58%, signaling that it’s a strong and stable investment.
Taco Bell typically offers 20-year NNN leases with varied escalations. The average price of the building is $2,615,500, and it normally sits on a lot that’s between 0.5 and 1.2 acres. The buildings are typically anywhere from 2,200 to 2,600 square feet. Taco Bell has a BB credit rating from S&P Global Ratings.
Located in high-traffic suburban retail areas and urban hubs, Starbucks is a major retailer of upscale coffee and light food. Typically, Starbucks operates under 10-year triple net leases with escalations of 10% every five years. It’s a public company traded on the Nasdaq under the symbol SBUX.
Starbucks offers a cap rate of 5.1%. The average sale price is $2,700,000 for a building that’s between 1,500 and 2,000 square feet. The stores sit on lots that are between 0.5 and 1.0 acres. Starbucks has a strong BBB+ credit rating from S&P Global Ratings.
Positioned in the fastest growing segment of the restaurant industry, Chipotle is a fast-casual Mexican restaurant with a focus on fresh ingredients and made-to-order meals. It typically offers 15-year NNN ground leases with attractive escalations every 5 years. However, it’s important to note that Chipotle does not yet have a credit rating.
The average sale price of the store is $2,670,000 with square footage between 2,000 and 3,500. Stores sit on lots of 0.5 to 1.0 acres. The cap rate for a Chipotle NNN lease is 4.8%.
Although Chick-fil-A is a private company, its NNN ground leases are backed by a strong corporate guarantee. Even though it franchises most of its locations, its known for having strong owners and maintains a low franchisee turnover rate. The average price comes in at $3,300,000 for a 4,500-square-foot store on a lot between 1.0 and 2.0 acres.
As a private company, Chick-fil-A does not have a credit rating. It does have a cap rate of 4.3%, signaling that it’s a stable investment that you can expect a consistent return from.
Advance Auto Parts
While many Advance Auto Parts locations offer NN leases, the company is beginning to transition to an NNN model. They specialize in aftermarket auto parts needs for both domestic and imported vehicles. The average sale price for a store is $1,840,000 for 6,000 to 7,000 square feet on a lot between 0.7 and 1.0 acres.
With lease terms ranging from 5 years to 15 years, Advance Auto Parts offers some variance. It has a BBB- credit rating from S&P Global Ratings, and it offers a 5.90% cap rate, meaning there’s potential for a higher return on investment if things go well.
A well-established convenience store with corner locations that boast excellent access, 7-Eleven is an investment-grade tenant with strong credit and brand recognition. Its NNN leases are normally between 10 and 20 years in length. The price of buying a store averages $5,400,000, and their sizes range from 2,500 to 3,500 square feet. The lot size varies.
7-Eleven’s credit rating from S&P Global Ratings is impressive, coming in at an A-. The store has a 4.25% cap rate on average.
For this comparison table, we’ve five picked the NNN investment tenants from our list with the highest cap rates. While incrementally less stable, these tenants may bring in more return on investment (ROI) in the long run.
|NNN Investment Tenants With the Highest Cap Rates|
|Tenant||Cap Rate||Avg. Price||Avg. Square Footage||Credit Rating|
|Advance Auto Parts||5.9%||$1.84 M||6,000 - 7,000||BBB-|
|Family Dollar||5.75%||$1.55 M||6,000 - 8,000||BBB|
|Dollar General||5.1%||$1.92 M||9,000 - 10,000||BBB|
|Starbucks||5.1%||$2.70 M||1,500 - 2,000||BBB+|
Are NNN properties good investments?
Yes, NNN properties are often good commercial real estate investments. That’s because many of them are low-risk, leave minimal responsibilities to the landlord, and generate long-term passive income.
What are the best triple-net lease tenants?
Some of the best triple lease tenants are FedEx, Advance Auto Parts, Family Dollar, Dollar General, and Starbucks. These companies offer attractive cap rates between 5% and 6% and all have attractive credit ratings per S&P Global Ratings.
Can you negotiate a triple-net lease?
Tenants can negotiate a triple-net lease to make it more favorable. One of the key points tenants often want to negotiate is the base rental amount. If the tenant is responsible for all overhead with a NNN lease, they may want a lower base fee.
Can a triple-net lease have a base year?
Triple-net leases cannot have a base year. That’s because the base year is tied to discovering the monetary amount of expenses for property taxes, insurance, and maintenance. In NNN leases, the tenant is responsible for all of those costs.
Can you get out of a triple net lease?
Triple-net leases that are bondable are often more difficult to get out of. But you can get out of a triple-net lease. Many companies have cancellation options in their leases on a yearly basis after the initial term of the lease.