The New Playbook for Real Estate Net Lease Investing

Net lease investing is evolving from a niche retail-focused sector into a sophisticated defensive strategy characterized by long-term, predictable cash flows and tenant-borne expenses that insulate owners from inflation. Hank D'Alessandro, a private credit and real estate investing expert at Morgan Stanley, highlights how private capital from pension and sovereign wealth funds is increasingly transforming the competitive landscape. While historically dominated by small retail assets, the market now prioritizes industrial distribution centers fueled by e-commerce and medical outpatient buildings supported by aging demographics. Successful participation requires rigorous dual underwriting of both tenant credit and the underlying real estate value to mitigate risks. Despite caution surrounding data center obsolescence, current market conditions—marked by 20-25% valuation resets and wide cap rates—present a compelling entry point. This shift aligns with global secular trends like deglobalization and technological diffusion, pushing investors toward mission-critical assets in both U.S. and European markets.