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Where Opportunity Exists in European Real Estate Today
As the European real estate industry gathers in Munich for EXPO REAL, investors are navigating a market defined by both uncertainty and evolving opportunities. While sentiment remains cautious amid ongoing economic and geopolitical challenges, opportunities continue to emerge for investors with disciplined underwriting and a long-term perspective. Here are four key themes we expect to shape conversations at this year's conference. Economic challenges persist in Germany, but defense spending could create new opportunities Compared with last year’s conference, the mood in Germany is likely to be more subdued. Europe's largest economy continues to face a range of challenges, including weaker industrial activity, geopolitical uncertainty and lingering concerns around inflation and interest rates. At the same time, increased defense spending across Germany and Europe could create an important counterbalance to some of these challenges. As governments commit more capital to defense, security and strategic manufacturing capabilities, demand for specialized industrial facilities and production infrastructure could increase. This investment has the potential to support certain manufacturing sectors, create new occupier demand and generate opportunities for real estate investors. Macroeconomic conditions will remain the dominant investment driver Macroeconomic conditions will continue to play a central role in real estate investment decisions across Europe over the next 12 to 18 months. While many investors had anticipated a more accommodative financing environment, recent rate hikes by the European Central Bank and the rise in long-term interest rates have added a new layer of complexity to the market. As a result, real estate investors remain focused on how financing costs, capital availability and geopolitical developments could influence property values and transaction activity across Europe. Periods of uncertainty can create selective opportunities, but disciplined underwriting and a long-term outlook remain critical for investors when evaluating new investments. Sale-leaseback activity will continue to grow Despite broader market uncertainty, the outlook for the European sale-leaseback market remains positive. As companies look for ways to strengthen balance sheets, improve liquidity and fund strategic initiatives, sale-leasebacks continue to offer a compelling source of capital. Private equity sponsors are similarly exploring sale-leasebacks as a tool to unlock value, support acquisition financing and optimize capital structures. While a significant inflationary or interest-rate shock could have a short-term impact, the broader trend points toward increased activity. As financing costs remain elevated and capital efficiency becomes more important for companies, sale-leasebacks are expected to remain a valuable financing solution across a variety of sectors. AI is reshaping real estate, but key questions remain Artificial intelligence continues to drive enormous interest in data centers and digital infrastructure. However, alongside the enthusiasm, important questions remain. Energy availability is emerging as one of the sector's biggest constraints. Across many European markets, power capacity is becoming increasingly difficult to secure, creating a bottleneck for future development. At the same time, investors are still evaluating how these assets should be valued over the long term. Rapid technological evolution, equipment depreciation and uncertainty around residual asset values create questions that have yet to be fully answered by the market. This may place a premium on assets and markets with reliable access to power and infrastructure capable of supporting future demand. Looking ahead Success in the current landscape will not be defined by predicting the next market shift, but by identifying opportunities that can withstand it. In an environment marked by uncertainty, investors focused on high-quality tenants, mission-critical real estate and creative capital solutions such as sale-leasebacks will be well positioned to take advantage of emerging opportunities.
How Real Estate Partnerships Can Accelerate Sustainability Progress
As companies navigate a rapidly changing business environment, sustainability is increasingly shaping real estate decisions. Many organizations are looking for ways to reduce energy consumption, lower emissions, strengthen resilience and modernize facilities without diverting capital from business growth. Yet sustainability initiatives often compete with other strategic priorities. Companies may see opportunities to improve efficiency or invest in renewable energy but hesitate to commit resources that could otherwise support growth or core operations. We believe making real estate more sustainable is an ongoing process that requires collaboration, flexibility and a long-term approach. Carey Tenant Solutions formalizes that commitment by helping our tenants address evolving real estate needs even after an acquisition or sale-leaseback transaction is complete. For tenants, that support can take many forms, from identifying operational improvements to funding projects that help facilities perform better over time. A long-term ownership mindset W. P. Carey’s long-term ownership approach means we view each transaction as the beginning of a partnership. Through regular dialogue, property visits and ongoing asset management, we develop a deep understanding of tenants’ operations and priorities, helping identify opportunities to improve facility performance and advance sustainability goals. This long-term approach allows us to continue supporting tenants as their businesses evolve. In 2017, W. P. Carey provided build-to-suit financing for an industrial facility in Poland leased to Ontex, a leading global supplier of personal hygiene products. Several years later, we partnered with Ontex again to fund a 460,000-square-foot expansion, enabling the company to consolidate production operations from multiple European locations into one modern facility. The expanded portion of the facility received a BREEAM "Very Good" environmental certification, demonstrating how Carey Tenant Solutions and a long-term partnership approach can support both business growth and sustainability objectives. Energy solutions built around tenant needs No two tenants have identical sustainability goals. As a result, flexibility is essential. Through Carey Tenant Solutions, W. P. Carey helps tenants evaluate and implement projects tailored to their operations and objectives. These initiatives can include energy efficiency retrofits, smart building technologies, electric vehicle charging infrastructure and other sustainability-focused improvements. Through our CareySolar® program, W. P. Carey partners with tenants on a variety of solar solutions designed to help our tenants lower utility costs and reduce greenhouse gas emissions. One example is our work with an industrial tenant in Illinois, where we managed the installation of a 1,350-kW rooftop solar array as part of a lease extension. The project was designed to provide the tenant with access to clean energy while lowering carbon emissions and energy costs at one of its most important facilities. These investments can create benefits beyond sustainability. Energy-efficient facilities may help lower operating expenses, improve tenant experience and support long-term building performance. Looking ahead As Climate Week brings together business leaders, policymakers and sustainability professionals to discuss the future of the built environment, one theme remains clear: meaningful progress requires partnership. Real estate owners and occupiers can achieve more when they work together. Through Carey Tenant Solutions, we're helping tenants expand and modernize facilities, improve energy performance and advance sustainability initiatives, while allowing them to preserve capital for the investments that drive their businesses forward.
How E-Commerce Is Shaping Supply Chains and Driving Demand for Logistics Real Estate
While the pandemic-era surge in online shopping has moderated, e-commerce remains one of the most powerful forces influencing logistics real estate. Consumer purchasing habits have fundamentally changed, with digital channels now firmly embedded in how people shop. As retailers, manufacturers and logistics providers adapt to rising expectations for speed, convenience and flexibility, the need for modern fulfillment infrastructure continues to expand. The result is a logistics landscape that is becoming increasingly sophisticated, with occupiers reevaluating distribution networks to better serve a digital-first economy. Logistics Has Become Critical to the E-Commerce Experience E-commerce has matured from a fast-growing retail channel into a foundational component of global commerce. According to a recent McKinsey survey, 57% of consumers rank digital as their primary purchasing channel—almost double the level reported in 2022. For retailers, this shift has significant supply chain implications. Fulfillment networks are being redesigned to support broader product assortments, deeper inventory levels, direct-to-consumer shipping, returns processing, and value-added services such as product assembly and customization. Real estate strategy is also becoming more closely tied to service levels. Facilities positioned near major population centers can help shorten delivery windows and improve the efficiency of last-mile logistics—the final stage of the delivery process, when goods move from a distribution facility to the end customer. As consumers continue to expect faster, more reliable delivery, this part of the supply chain has become a key competitive differentiator. Nearshoring Is Providing an Additional Tailwind Companies are increasingly pursuing nearshoring and onshoring initiatives to improve supply chain resilience, reduce transportation costs and bring production closer to end markets. These strategies gained momentum following years of supply chain disruptions and continue to be influenced by evolving trade policies and geopolitical considerations. Unlike last-mile strategies, which focus on the final movement of goods, nearshoring is reshaping the upstream side of the supply chain. By moving production closer to end markets, companies can improve operational control, reduce exposure to disruption and better align inventory with customer demand. In the U.S., changes in foreign trade policies and tariff structures have further encouraged companies to diversify sourcing strategies and establish a stronger domestic presence. Cross-border e-commerce companies, in particular, are expanding their U.S. logistics footprints to help future-proof operations amid potential regulatory changes. As new manufacturing facilities come online, the need for supporting warehouse, distribution and transportation infrastructure is expected to increase, creating additional opportunities within industrial and logistics real estate. A New Era for Logistics Real Estate It’s projected that U.S. e-commerce penetration—the percentage of total retail sales that occurs online—will rise from approximately 24% in 2025 to 30% by 2030. This growth has meaningful implications for logistics real estate demand, as every one percentage-point increase in e-commerce's share of retail sales translates into approximately 50 million to 70 million square feet of industrial space absorption. Beyond sheer volume growth, e-commerce is also changing the type of industrial and logistics space occupiers require. To support greater supply chain flexibility, companies are increasingly seeking modern facilities with higher clear heights, advanced automation capabilities and strong transportation connectivity. Looking Ahead E-commerce is no longer just changing how consumers shop—it is reshaping how companies build, operate and future-proof their supply chains. Well-located, modern facilities with the flexibility to support evolving distribution strategies are likely to remain in high demand, underscoring the long-term value of logistics assets in a digital-first economy.
Sale-leasebacks Earn a Bigger Role in Capital Strategies
Corporate operators and private equity sponsors are increasingly using sale-leasebacks in their capital strategies, whether to fund acquisitions, manage costs, or improve their balance sheet position. When companies own significant real estate, this structure provides access to the full property value without disrupting operations, says Zachary Pasanen, managing director and co-head of North American investments at W. P. Carey. "Companies often have significant capital tied up in real estate, so a sale-leaseback allows them to monetize the real estate fully, lock in a very long-term contract, and fix their rent for a sustained period of time," Pasanen says, adding that proceeds are commonly used to shore up balance sheets, fund growth initiatives, pay down expensive debt, or address near-term obligations coming due. As more companies weigh their options for unlocking the value of their real estate, the structure's appeal comes down to how well it fits broader capital goals. Private Equity Sponsors Find Value in the Multiple Gap Private equity firms have become steady users of sale-leasebacks to finance corporate acquisitions, Pasanen notes. This structure provides an opportunity to capture value from the gap between the real estate multiple and the acquisition multiple. "You can often find strong accretion by utilizing the sale-leaseback," Pasanen says. He adds that prudent CFOs and sponsors are factoring it into M&A strategies as an additional way to capitalize acquisitions. Corporate operators are also using this structure for other balance sheet purposes. For example, companies looking to pay down near-term or expensive debt may apply sale-leaseback proceeds while maintaining operational control of their facility. "The way we structure a lease gives them effectively the same controls they had when they owned the facility," Pasanen says. He explains that tenants can make alterations within reason, and they remain responsible for taxes, maintenance and insurance, much as they were before the deal closed. Pasanen also notes that W. P. Carey is a long-term capital partner to its tenants and can support their real estate needs as they evolve, with the ability to finance expansions, renovations or energy retrofits at their leased properties. Capital Flows In as Appetite Stays Strong Companies holding real estate often find the structure attractive because it helps them unlock a property's full market value. Pasanen notes that mortgage financing, by contrast, typically returns around 50 to 70 cents on the dollar. Corporate demand for sale-leasebacks is met by a market with no shortage of capital supporting it. Pasanen expects the sale-leaseback market to remain active, noting that a growing pool of investors are entering the space. For specialized facilities where tenants have invested heavily and relocation is expensive, Pasanen says investor demand remains particularly strong. This suggests the structure will remain a viable option, particularly for companies whose real estate is critical to their operations.
Sale-leasebacks: A Flexible Capital Solution Across the M&A Lifecycle
As private equity firms continue to navigate a dynamic M&A environment, access to capital is critical. One increasingly important tool in their toolkit is the sale-leaseback. By unlocking capital embedded in real estate, sale-leasebacks can support transactions at multiple stages of the deal lifecycle – from acquisition financing to post-close optimization. Below, we explore how private equity sponsors are leveraging sale-leasebacks both at the point of acquisition and after closing, with a recent transaction serving as a practical example. Strengthening the Capital Stack at Acquisition In competitive M&A processes, particularly in corporate carveouts or complex platform acquisitions, certainty of financing and speed of execution are critical differentiators. Sale-leasebacks can play a key role at this stage by serving as a complementary capital source within the transaction structure. Rather than relying solely on traditional debt or equity, private equity firms can incorporate a sale-leaseback to monetize a target company’s owned real estate as part of the acquisition financing. Because land and buildings tend to sell at higher valuations than the company itself, private equity firms can sell portfolio company real estate and rent it back under a long-term lease, thereby capturing a multiple arbitrage and blending up their initial purchase price multiple without necessarily contributing more equity themselves. Using a sale-leaseback at closing serves a number of benefits, including: Providing immediate funds to aid in maximizing purchase price to a Seller (and winning an auction) Reducing the required equity investment Lowering overall cost of funds or increasing overall financing duration from traditional financing sources In this way, sale-leasebacks serve not just as a financing tool, but as a competitive edge in winning and efficiently executing complex M&A transactions. Unlocking Value Post-Acquisition While executing a sale-leaseback at closing may often be optimal, for a number of reasons acquirors may prefer to wait until post-closing to pursue a sale-leaseback. Post-acquisition capital can be a way to fund additional acquisitions, repay expensive debt, or invest in incremental equipment or higher ROI opportunities. Once a private equity firm has acquired a business, monetizing owned real estate through a sale-leaseback allows the sponsor to: Recapture a portion of its initial equity investment Reallocate capital toward portfolio company growth initiatives, add-on acquisitions or operational improvements Replace shorter-term debt with long-duration leases with no refinancing risk Post-closing sale-leasebacks offer a number of advantages in optimizing a business where additional capital could be put to better use. Private equity firms can often benefit from evaluating their real estate portfolios to find untapped sources of capital to reinvest in their businesses. Case Study: GardenCore In May 2026, W. P. Carey completed the $400 million sale-leaseback of a 43-property manufacturing portfolio leased to GardenCore, a leading U.S. manufacturer of lawn and garden consumables. The deal was completed in conjunction with a private equity firm’s acquisition of the business as part of a corporate carveout. By incorporating the sale-leaseback into the capital stack, the sponsor was able to unlock value and reduce the acquisition purchase price, illustrating how sale-leasebacks can help facilitate complex M&A deals. A Strategic Lever for Private Equity As M&A activity continues to evolve, sale-leasebacks are increasingly becoming a core component of how private equity sponsors structure and optimize their acquisitions, transforming real estate from a passive asset into a strategic source of capital. With over $6 billion in private equity financing completed since 1973, W. P. Carey remains well positioned to support private equity firms in unlocking significant capital through sale-leasebacks. Get in touch today!
Why Build-to-Suits Are Gaining Momentum in Today’s Market
As companies navigate an increasingly complex operating environment, one theme is becoming clear across the industrial and logistics sectors: flexibility and tailored real estate matter more than ever. Against this backdrop, build-to-suit development is gaining renewed momentum—emerging as a strategic solution for occupiers seeking custom real estate that aligns with their business needs. A Market Defined by Constraints and Opportunity Today’s market conditions are creating a natural tailwind for build-to-suit projects. In many logistics hubs, available space is limited, while demand for high-quality, well-located facilities remains strong. At the same time, elevated construction costs and shifting supply chains have slowed speculative development, further limiting available real estate. For occupiers, existing real estate often falls short of increasingly complex operational requirements. Whether driven by automation, inventory optimization or last-mile delivery needs, companies are prioritizing facilities that are tailored to their business from day one. Build-to-suits bridge this gap—offering a direct path to purpose-built space in markets where alternatives are limited. The Shift to Purpose-Built Real Estate The increase in demand for build-to-suits reflects a broader evolution in how companies view real estate. Rather than adapting operations to fit an existing building, occupiers are increasingly designing space around their workflows, equipment and long-term growth plans. A build-to-suit is fundamentally a partnership model: a developer or capital provider funds and delivers a custom facility aligned with a company’s specifications, with the company entering into a long-term lease upon completion. This approach has several key advantages: Customization: Facilities are custom-built for the tenant’s needs and designed to optimize layout from the outset Capital efficiency: Companies can preserve capital for core operations rather than investing in real estate Operational control: Tenants maintain operational control of the real estate Scalability: Properties can be designed with future expansion, sustainability improvements or evolving requirements in mind In a market where efficiency and resilience are paramount, these benefits are becoming increasingly compelling. Aligning Real Estate with Supply Chain Strategy One of the most significant drivers behind the growth of build-to-suits is the transformation of global supply chains. Companies are rethinking their networks to improve resilience and proximity to end customers, placing greater importance on the role of real estate within their broader strategy. As a result, modern logistics facilities are no longer just warehouses; they are highly specialized hubs incorporating automation, advanced power requirements, specialized layouts, sustainable features, and strategic proximity to population centers and key transportation routes. As these requirements become more complex, custom build-to-suit development is increasingly the most effective—and sometimes only—option. Momentum That’s Here to Stay What began as a niche solution for highly specialized occupiers is becoming a mainstream approach across industries. From e-commerce and third-party logistics providers to manufacturers and retailers, a growing range of companies are turning to build-to-suits to meet their evolving real estate needs. At W. P. Carey, we see this trend as a reflection of how occupiers increasingly value partnership. Through our Carey Tenant Solutions platform, we work alongside tenants to design, fund and deliver tailored real estate solutions that align with their operational goals. By combining deep expertise with a partnership-driven approach, we help companies turn real estate into a strategic advantage—built for today’s needs and adaptable for the future.
Net Lease Retail Continues To Surge
Net lease retail continues to attract investors seeking stability, long-term income, and defensive retail plays, and market momentum should remain strong into next year, experts say. GlobeSt spoke with Michael Fitzgerald, Head of U.S. Retail Investments for W. P. Carey, at this year's ICSC Las Vegas conference to discuss which retail categories are strongest, why sale-leasebacks continue to dominate the landscape and why he remains bullish on net lease retail. In this video, you'll hear: Which retail categories are the strongest in the current market What's driving the growth of sale-leaseback transactions How the net lease market will perform in 2027 Watch now An interview with Michael Fitzgerald, W. P. Carey, and Holly Amaya, GlobeSt.com.
Net Lease Retail is at an Inflection Point
As retail investors and operators convene in Las Vegas for ICSC, the conversation around net lease retail feels both familiar and different. Familiar, because the net lease retail market continues to demonstrate resilience and stability. Different, because the drivers shaping today’s retail real estate decisions are evolving—creating new opportunities for operators and investors alike. From rising sale-leaseback activity tied to M&A, to more intentional approaches around store size and format, today’s net lease retail market is being shaped by a combination of strategic growth decisions, changing consumer behavior and a more balanced transactional environment. These are several of the key trends taking center stage ahead of the conference. Sale-leasebacks Follow Strategic M&A Activity One of the most consistent drivers of sale-leaseback volume in retail today is merger and acquisition activity. Whether it involves private equity-backed platforms consolidating regional brands or strategic buyers acquiring complementary concepts, transactions often prompt companies to reassess their balance sheets—and real estate frequently emerges as one of the most efficient sources of capital. In many cases, companies come out of acquisitions with real estate portfolios that were not central to the strategic rationale of the deal. Sale-leasebacks allow operators to unlock that capital, streamline their asset base and redeploy proceeds into higher-return priorities such as new stores, technology investments or debt reduction. What stands out in the current environment is that this activity is not limited to highly leveraged situations. Healthy, growing retailers are increasingly using sale-leasebacks proactively as part of longer-term capital planning, particularly when M&A introduces scale or accelerates geographic expansion. Sale-leasebacks continue to provide a compelling alternative to traditional financing for businesses seeking flexibility and predictability. The Evolution Toward Smaller, More Flexible Footprints Another defining trend across retail is the ongoing evolution of physical store footprints. While large-format locations remain relevant in certain categories, many retailers are gravitating toward smaller, more efficient concepts that align with omnichannel strategies and localized demand. These stores are often designed to serve multiple functions—acting as showrooms, service hubs, fulfillment points or a combination of the three. Flexibility has become increasingly important, both in store design and in location strategy, as retailers respond to shifting consumer behavior. From a net lease perspective, this evolution places greater emphasis on unit-level fundamentals. Smaller footprints can generate compelling cash-on-cash returns, but success depends heavily on the alignment between location, concept and the operating model. The underwriting process for net lease retail investors is therefore increasingly focused on how these formats perform across markets, how scalable they are and how they fit into a retailer’s broader growth strategy. Stabilized Cap Rates Bring Predictability Back to the Market After a period of volatility driven by rapid interest-rate movements, cap rates across the net lease retail space have begun to stabilize. While pricing discipline remains essential, the return of predictability has had a meaningful impact on transaction activity. Clearer valuation benchmarks make it easier for buyers and sellers to transact. Investors can underwrite opportunities with greater confidence, tenants can assess capital alternatives more thoughtfully and deals are less likely to stall amid uncertainty around pricing expectations. That said, credit quality, location fundamentals, lease structure and real estate criticality remain core considerations. However, in a more balanced environment, high-quality assets supported by strong operators are finding liquidity, and capital is moving more efficiently. Looking Ahead As ICSC Las Vegas approaches, there is optimism across the net lease retail landscape. While uncertainty remains part of the broader economic backdrop, the conversations in Las Vegas are expected to reflect an industry that has evolved through recent cycles and continues to find opportunity through change. For net lease retail, the current environment represents less of a reset and more of a recalibration—one that rewards sound fundamentals, flexibility and a long-term investment approach.
Net Lease Retail Demand Follows Where Retailers Are Growing
The US net lease market is experiencing a resurgence. Valuations reset throughout 2025, meaning the bid-ask spread narrowed. And in spite of economic headwinds, net lease volumes increased by 24% year-over-year for the fiscal year ending in Q3 2025, according to CBRE. For Michael Fitzgerald, managing director and head of US retail at W. P. Carey, finding the right retail investment opportunity starts with understanding some tell-tale signals. “The US net lease retail environment is driven primarily by the general health of retailers,” says Fitzgerald. “Are there a large number of retail operators that are opening new locations or investing in existing locations in a way where they need access to capital?” When the answer to that question is yes, deal flow often follows, and Fitzgerald points to specific categories where he sees the strongest deal flow and investor interest right now. Non-discretionary Categories Draw Investor Interest Fitzgerald notes that retailers that sell non-discretionary products or services are among the most interesting for investors, but tend to carry lower cap rates. “We also think about the macro trends, such as fitness,” says Fitzgerald. “It used to be something that a small percentage of the population would pay for; now it’s become a non-discretionary spend for a lot of families because general health and fitness have become a priority.” He notes that convenience stores, car washes and automotive services are among the other segments he sees generating strong deal flow, with car washes having regained interest and automotive services drawing attention across the board. Full Loan-to-Value Appeal Drives Demand For business operators or CFOs seeking efficient forms of capital, Fitzgerald explains that the net lease structure is hard to beat. “They can redeploy that capital back into their businesses at a higher return because they’re getting more loan-to-value than a mortgage,” says Fitzgerald. “That’s why we see sale-leasebacks continuing to be one of the top choices for businesses that have an ongoing need for capital.” When evaluating a net lease retail asset, Fitzgerald explains that the analysis centers on whether a location can generate enough cash flow to cover rent easily across a commitment that can run for 20 years or more. He also notes that new stores can complicate that picture since there is no operating history to draw from, which is why assets with longer track records tend to be the easiest to understand and underwrite. Net Lease Retail Holds Up Across Good Economies and Bad Despite continued headlines about retailer store closures, Fitzgerald notes that the net lease retail market is more durable than the news cycle suggests. He explains that the net lease market has proved resilient across good and bad economies, with the most difficult periods coming not from downturns but from rapid interest rate swings in either direction. “I’m optimistic about the net lease retail market. Even in times of relative instability, we continue to see consistent deal flow, as companies leverage sale-leaseback transactions to monetize real estate and fund growth,” says Fitzgerald.