Single tenant net lease (STNL) investments are a cornerstone of commercial real estate, offering simplicity and stability for both investors and tenants. But what exactly defines these properties, and why are they so popular? Randy Efron of Skylatus Property Capital breaks down what makes a property "single tenant" and "net lease," and why both landlords and tenants tend to prefer this structure.
What this guide covers
Defining Single Tenant Net Lease Properties
Single tenant net lease properties are standalone buildings leased to one business or entity — think a Walgreens, CVS, McDonald's, Taco Bell, 7-Eleven, or Chase Bank branch. You'll also find them in auto parts stores (like AutoZone), distribution facilities (FedEx), medical clinics (DaVita), and government offices. The common thread: one tenant occupies the whole building, with no shared walls with other businesses.
What "Net Lease" Actually Means
The "net lease" part of STNL means the tenant does more than just pay rent — they also cover most or all property operating expenses. These expenses usually include taxes, insurance, and maintenance (in "triple net" or NNN leases, the tenant pays all of these and more).
| Lease Type | Who Pays Operating Expenses |
|---|---|
| Gross Lease | Landlord pays all building expenses; tenant pays only rent |
| Modified Gross Lease | Costs are split between landlord and tenant |
| Net Lease (incl. Triple Net / NNN) | Tenant is responsible for most or all operating costs, minimizing landlord responsibilities |
For STNL investments, this setup translates into predictable, passive cash flow for owners — mirroring the stable returns of owning a bond. We break down exactly how that stability translates into pricing in our companion guide to net lease valuations.
Why Tenants and Landlords Both Prefer STNL
Tenants like McDonald's, Walgreens, or banks commit major resources for building out or customizing these properties — think branding, specialized layouts, and significant equipment investments. That's why both landlord and tenant aim for long-term leases, often 10 to 25 years, providing security for both parties.
For landlords, there's minimal management after signing — a "set it and forget it" proposition. For tenants, long leases protect their capital investment and guarantee use of the site for years to come.
Where STNL Works Best
You'll find STNL properties across retail, medical, logistics, and financial services. Their popularity stems from their stability and ease of management, making them especially attractive to passive investors who want steady income with as little hassle as possible.
Related Capital Structure Resources
If you want to learn more about how single tenant net lease investments can play a role in your portfolio or need help structuring your next acquisition, you may also want to review:
Frequently Asked Questions
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