Industrial
MIPIM 2026: Where Capital, Conviction and Opportunity Converge
As the industry gathers once again in Cannes for MIPIM 2026, the European real estate investment landscape appears to be at an important inflection point. After several years defined by volatility, repricing and constrained liquidity, there are growing signs of stabilisation — though the recovery remains uneven and market-specific. Against that backdrop, three questions are likely to dominate conversations at MIPIM this year: Are European transaction volumes expected to improve? How will the sale‑leaseback market evolve amid a significant wall of maturing debt? Which sectors appear best positioned as investors recalibrate their strategies? The Outlook for European Transaction Volumes Pricing expectations between buyers and sellers have adjusted meaningfully over the past 18–24 months, following one of the sharpest repricing cycles the European real estate market has experienced in decades. After a prolonged period of stalled activity, valuations across many markets now show clear signs of stabilisation, supported by greater transparency around interest‑rate policy and financing costs. While long‑term rates remain elevated relative to the pre‑2022 environment, the pace of change has slowed, allowing investors to underwrite returns with greater confidence and begin re‑engaging selectively with the market. This improved clarity around cost of capital is starting to translate into renewed deal momentum in several core European markets. Savills reports that European investment volumes are expected to rise by around 18% in 2026 as pricing firms up, macroeconomic conditions stabilise and institutional capital returns more consistently across the main sectors. That said, recovery is unlikely to be uniform. We continue to see divergence between markets and sectors, with liquidity gravitating toward assets where fundamentals are strongest and underwriting assumptions can be supported over the long term. Sale‑leasebacks and the Growing Need for Capital One of the most prominent themes we expect to discuss at MIPIM 2026 is the growing demand for alternative sources of capital — particularly as a significant amount of corporate and real estate debt comes due this year and next. Across Europe, many owner-occupiers are facing refinancing challenges in an environment where traditional bank lending remains selective and difficult to access. At the same time, businesses are contending with higher operating costs, investment requirements linked to competitiveness, and the need to preserve balance‑sheet flexibility. In this context, sale‑leasebacks are increasingly being viewed as a strategic financing tool. By unlocking capital tied up in real estate, owner-occupiers can redeploy funds toward growth initiatives, operational requirements and debt paydown, while retaining long‑term operational control of their assets. Sectors to Watch: Industrial and Retail When it comes to sector preferences, industrial and retail assets continue to stand out, provided they are underpinned by strong occupier fundamentals. In the industrial space, manufacturing and logistics assets that play a critical role in supply chains remain attractive. Structural trends such as nearshoring, supply‑chain resilience and e‑commerce continue to support demand in many European markets. Assets that are modern, well‑located and tailored to tenant needs are increasingly difficult to replace, reinforcing their long‑term importance. Retail also remains an area of opportunity — particularly for formats that serve non‑discretionary or value‑oriented consumer demand. Grocery‑anchored retail, DIY, and other essential retail categories have demonstrated resilience through economic cycles, supported by consistent foot traffic and defensive spending patterns. A Measured but Constructive Outlook MIPIM 2026 comes at a time when optimism is returning to European real estate markets. While challenges remain, there is growing evidence that capital is being deployed at more significant levels — particularly where opportunities are grounded in fundamentals rather than short-term trends. The conversations in Cannes this year are likely to reflect that balance: pragmatic, selective, but increasingly forward‑looking. For long‑term investors focused on durable cash flows and partnership‑driven transactions, the environment continues to present compelling opportunities.
2026 Net Lease Outlook
After several years marked by inflation, interest rate uncertainty and selective buyer activity, the U.S. net lease market enters 2026 with more clarity – and more momentum. As pricing resets work through the real estate sector and investors gain confidence in the direction of capital markets, we expect an increase in transaction volume in the year ahead. Below are three predictions set to shape the U.S. net lease landscape in 2026. Transaction Volume Will Rebound as Pricing Stabilizes The reset in valuations throughout 2024 and 2025 has narrowed bid‑ask spreads and revived buyer activity. As the sector digested Fed policy shifts and debt markets steadied, transaction activity began increasing meaningfully – particularly in industrial and logistics. As a result, we expect a measurable uptick in volume in 2026 as investors lean into improved cost‑of‑capital visibility. Colliers forecasts that U.S. CRE transaction volume will grow 15–20% in 2026. Industrial Will Continue to Dominate Industrial demand is positioned to remain strong in 2026. As trade‑policy uncertainty eased in late 2025, many companies who had paused expansion or relocation decisions finally moved forward, bringing a wave of leasing activity that is carrying into the new year. E‑commerce also continues to be a powerful structural driver, underpinning robust leasing demand as retailers and logistics operators expand fulfillment capacity to meet consumer needs. At the same time, development pipelines have slowed, allowing the market to work through new supply. As a result, vacancy is expected to stabilize in 2026, reinforcing a fundamentally balanced environment for investors and occupiers alike. Rising M&A Activity Will Drive New Sale‑Leaseback Opportunities An anticipated rise in M&A activity will likely fuel an increase in sale‑leaseback opportunities in 2026. Private equity firms often use sale-leasebacks to reduce upfront equity requirements and enhance returns when acquiring a new business, especially in deals where real estate represents a meaningful share of the purchase price. On the post-acquisition side, sale-leasebacks can offer PE firms considerable financial flexibility, supporting reinvestment into the portfolio company’s business or even future follow-on acquisitions. Altogether, the anticipated surge in M&A is expected to expand the pipeline of high‑quality real estate coming to market, providing ample opportunity for sale-leaseback investors. Final Thoughts As 2026 unfolds, the U.S. net lease market is entering a period of renewed stability and opportunity. With transaction volumes rebounding, industrial demand holding firm and sale-leaseback activity accelerating alongside M&A trends, investors have multiple avenues to deploy capital strategically. Staying attuned to these drivers will be essential for navigating the year ahead.
Is a Sale-leaseback Right for Your Business?
Economic uncertainty and restricted debt markets are leading more corporate occupiers to explore alternative financing options such as sale-leasebacks to secure funds. In a sale-leaseback, a company sells its real estate to an investor for cash and simultaneously enters into a long-term lease thereby unlocking otherwise illiquid capital to redeploy into higher growth segments of its core business. A sale-leaseback is an innovative tool that can be especially advantageous in today’s market where debt financing may be less attractive but is your company and your real estate the right fit? Read on to determine if (and when) a sale-leaseback is right for your business. The Criteria for a Sale-leaseback Own your real estate The key criterion for a sale-leaseback is real estate ownership. One of the primary drivers for a company to undertake a sale-leaseback is to unlock 100% of the real estate’s value while maintaining long-term operational control of the asset. By selling your property and leasing it back, you remove a non-incoming producing, fixed asset (real estate) and unlock liquid capital to reinvest into your business. Own the right type of real estate While the mainstream commercial property sectors of industrial, retail and office are most common in a sale-leaseback transaction, other specialty assets like life sciences and data centers have expanded the pool of investable assets. Make sure it's critical to your operations Investors look for specific value-add characteristics before buying a property. For instance, it’s best if your asset is mission-critical—in other words, an essential revenue driver for your business. Potential investors will also likely consider the property’s condition and age (high-quality, modern assets with sustainable features will be more valuable), location (think proximity to transportation routes) and size. Desired size will depend on the investor and often vary by property type. Retail properties for example tend to be smaller (perhaps around 20,000 square feet), compared to an industrial asset that might be upwards of 250,000 square feet. Additional space to expand the facility is also a plus for investors. However, the criticality of the asset to your operations is often more important than the asset type or size itself. Have a strong underlying credit story (sub-IG credits welcome!) You’ll attract real estate investors if you have a strong underlying credit and revenue history. Due to the long length of leases typically associated with sale-leasebacks, the investor will want to be confident that you can consistently pay rent throughout the lease term. However, this doesn’t mean your company must be investment grade. Many investors can work with sellers that are sub-investment grade so long as the underlying fundamentals of the business are solid. Institutional investors with strong underwriting capabilities will be able to evaluate all credits and assess your financial statements in order to get comfortable with pursuing a sale-leaseback deal. Be willing to sign a long-term lease, but ask the right questions upfront The last criterion for a sale-leaseback is that you must be willing to sign a long-term lease with the investor, typically 10-30 years. Before signing a long-term lease, it’s important to consider some critical factors, including: Space requirements: Evaluate your current and future space requirements to ensure the leased property will accommodate your needs for the duration of the lease. If additional space is needed, it’s possible your sale-leaseback partner will work with you on an expansion or build-to-suit of a brand-new asset. Renewal options: Does the lease come with renewal options? Find out the renewal terms for which the lessor is willing to extend the lease period so that you can continue occupying the property once the initial period for the lease expires. Maintenance and repairs: Know who's responsible for any maintenance and repair needs of the leased commercial property. In a triple-net lease, for instance, the tenant is responsible for all insurance, taxes and maintenance expenses, which also means the tenant maintains full operational control. By considering all the above factors, you can make an informed decision and confidently enter into a long-term lease. When to Consider a Sale-leaseback? While sale-leaseback financing is an excellent alternative to loans and other debt financing, it's not ideal for every company in every circumstance. Here are a few examples of when it makes sense to consider a sale-leaseback for your business. When you need capital for growth Sale-leasebacks are an excellent tool to unlock cash for growth initiatives, particularly for companies with limited access to traditional forms of financing. Proceeds from sale-leasebacks can be channeled to investments in new equipment, technology, personnel or additional facilities. And the best part is that a sale-leaseback enables you to raise capital without losing control of your property. To support M&A If you're considering an M&A transaction, you may need to raise additional capital to fund the purchase of the target company—or to pay down debt following an acquisition—which may be the case for companies and private equity firms alike. Usually, the cost of capital for commercial real estate investors is quite competitive as a real estate investor will acquire your property at market rate, creating an immediate arbitrage between the real estate multiple and the acquired business EBITDA multiple. To strengthen your balance sheet A sale-leaseback can help strengthen your business’ balance sheet by shoring up much-needed cash. You can use the raised capital to pay off existing debt, boost your debt-to-equity ratio or invest in other revenue-driving areas of your business. Remember the composition of your business’ balance sheet determines how lenders, investors and shareholders view your company's risk profile. If you have less debt, your business will be more attractive to these parties. Final thoughts A sale-leaseback transaction is an excellent alternative for companies, especially during periods when traditional sources of financing are limited. When choosing a sale-leaseback partner, consider an experienced, long-term investor who can buy on an all-equity basis and who is willing to work with you throughout your lease (and beyond). W. P. Carey has been a leader in sale-leasebacks since 1973 and is well-positioned to continue helping companies unlock capital even in today’s challenging economic environment. Maximize your real estate and unlock immediate capital by contacting our team today!
The Outlook for Industrial
The industrial real estate sector continues to stand out as a resilient and adaptive asset class, even amid economic uncertainty and shifting global dynamics. As we move through 2025, several dominant trends are shaping the trajectory of the market—from a fundamental shift in global supply chains to rising sustainability expectations, technological advancements and recalibration of capital strategies. Here’s a look at what’s driving the market: Onshoring and Supply Chain Reconfiguration The reshoring of manufacturing and logistics operations is no longer a speculative trend—it’s a structural shift. Spurred by pandemic-era supply chain disruptions and ongoing tariff concerns, companies are doubling down on operational resilience. This has led to a surge in demand for modern industrial space in inland and secondary markets, particularly near major highway corridors and intermodal hubs. This shift is putting pressure on developers to deliver new inventory quickly, even as construction costs and permitting timelines remain elevated. In particular, industrial locations in non-coastal metros are seeing increased activity as firms diversify away from traditional port-adjacent markets. Demand for Sustainable Real Estate Sustainability is no longer a “nice to have”—it’s a core tenant demand. Industrial occupiers are increasingly seeking energy-efficient, environmentally responsible facilities that align with their business goals and lower operational costs. This includes buildings equipped with solar-ready rooftops, LED lighting, EV charging infrastructure and LEED certifications. The push for greener buildings is also being driven by investors, who are factoring sustainability into underwriting and long-term asset value. Sustainable assets typically observe higher value in the market and are likely to lease up faster. Advancements in Technology From AI-enabled automation to smart building systems and robotics, technology is revolutionizing industrial and warehouse properties. In fact, more than a quarter of U.S. warehouse inventory is expected to be automated by 2027. Industrial occupiers leverage automation to create a more efficient process for moving products through their facilities, speeding up order fulfillment and improving inventory management. Properties equipped with automation and robust digital infrastructure are also typically viewed as “future proof,” making them more attractive to investors over the long term. Capital Markets and the Rise of Sale-Leasebacks Tariff concerns, economic volatility and tightened liquidity are prompting many corporate occupiers to turn toward alternative sources of capital, such as sale-leasebacks. This trend is especially pronounced in the industrial sector due to the strong investment profiles of these assets. The primary benefit of a sale-leaseback is the ability to immediately convert an illiquid real estate asset into liquid capital to meet both short- and long-term needs. Sale-leasebacks can also help boost a company’s balance sheet by putting them in a better cash position and improving their debt-to-equity ratio, enabling them to secure more attractive debt financing in the future should they need it. The Future is Bright Despite short-term headwinds such as tariffs and macroeconomic uncertainty, the industrial real estate market in 2025 is defined by transformation and opportunity. Onshoring is redrawing the logistics map, sustainability is reshaping development, technology is boosting efficiency and output, and capital markets are evolving to meet new financial realities. For stakeholders across the supply chain—from developers and investors to tenants and brokers—understanding these trends, and opportunities, is essential for navigating the road ahead.
Will the Net Lease Market Thrive in 2025?
The net lease industry has faced significant challenges in recent years, grappling with widespread economic uncertainty, soaring inflation and elevated interest rates leading to muted growth. However, a turning point came in the second half of 2024, when the Federal Reserve began cutting interest rates, ushering in lower cost debt and injecting some optimism into the market. While most industry experts believe net lease is poised for an upswing in 2025, the extent of the recovery remains in question. As the industry gears up to “thrive in ‘25”, here are three predictions for the year ahead. Transaction volume will likely increase, but uncertainty around interest rates will remain After three rate cuts by the Federal Reserve last year, real estate investors have gained more confidence in the market, signaling the beginning of a turnaround for transaction volume. Colliers latest outlook forecasts a 25-33% growth in aggregate volume in 2025, driven by a strong economy, improving fundamentals and growing demand for key asset classes. The bid-ask spread between buyers and sellers will also continue to narrow in 2025, supporting more robust investment activity. However, the predicted boost in transaction volume is largely tied to the future of interest rates which is uncertain. The timing and pace of further rate decisions will depend on many factors, including the impact of the incoming administration’s policies – mainly surrounding tariffs and immigration – on inflation. Net lease investors will explore new property types as technology and innovation drive trends Shifting economic factors and trends will also likely lead to a change in where net lease investors will look to allocate their capital. One of the fastest growing sectors over the past year has been data centers, which have seen a huge uptick in demand because of growing digital infrastructure needs and the advent of artificial intelligence. The average vacancy rate among primary North American data center markets in 2024 hit a record low of 2.8%, according to CBRE. The firm also forecasts the average preleasing rate for data centers to rise to 90% or more in 2025. Another sector to watch is healthcare, with an aging population, growing healthcare spending and new technologies supporting increased investor demand. In particular, medical outpatient buildings are well-positioned to benefit from these trends, in addition to shifting consumer preferences for accessing healthcare in more convenient locations. Industrial and retail will remain steady as positive tailwinds support demand Despite new sectors potentially drawing investor interest, the net lease sector will remain underpinned by two of its core property types – industrial and retail. Driven by e-commerce needs, warehouses and other industrial real estate properties are still in demand. In Q3 2024, industrial vacancy rates dipped slightly to 6.7%, according to Moody’s CRE. Furthermore, changes in trade policy will likely boost demand for industrial facilities near the U.S.-Mexico border – bolstering markets such as San Antonio, Austin and Dallas/Fort Worth. Retail enters the new year with the lowest vacancy rate of any commercial real estate sector and will remain steady throughout 2025. Demand for retail continues to be primarily driven by location – with assets in densely populated areas garnering the most investor interest. Increased consumer spending as a result of easing inflation will also be a positive tailwind for retail growth in 2025.
Net Lease Investors Eye Cross-Border Opportunities and New Property Types in 2025
The net lease market is positioned for change in 2025, with investors monitoring trends in geographic expansion and property types, as well as shifting economic factors. While the US remains a key market for many, international opportunities are gaining ground, particularly in Mexico, as noted by Tyler Swann, managing director of investments at W. P. Carey. “Mexico is a market we’ll be watching closely next year,” says Swann. “We’re seeing more sale-leaseback and build-to-suit opportunities there, particularly as more American and International manufacturers set up shop in the country.” Alongside these international prospects, investors are exploring new property types and preparing for economic factors like ongoing interest rate volatility and tariffs. By keeping an eye on these trends, investors can better position themselves for what’s next, says Swann. Geographic Expansion and Emerging Property Types While the US and Europe remain the cornerstone of net lease investment for W. P. Carey, Swann is monitoring other international markets, such as Mexico and Canada, for growth. “Our largest transaction in 2023 was in Canada,” he says. The country’s interest rates differ from those in the US, and Swann is keeping a close watch on how this impacts market pricing with an eye to expanding further if the opportunity exists. New opportunities in 2025 aren’t limited to geography, Swann notes. Some non-traditional property types are also getting a look from the net lease world. “We’re seeing more activity from net lease investors in the data center world,” says Swann. “Clearly, there’s a need for a tremendous amount of capital to fund the buildout of these new data centers.” However, he adds that W. P. Carey takes a selective approach, focusing on long-term leases to single tenants to ensure returns comparable to the company’s core industrial investments. Healthcare properties, particularly those in prime locations, are also attracting attention. “To the extent that we can find those well-located healthcare assets, I think that‘s something we’ll explore in 2025,” says Swann. Swann sees the key criteria for healthcare investments to be their proximity to population centers with favorable demographic trends and the asset’s importance to the local community. Continued Interest Rate Volatility and an Unpredictable Market As the net lease market heads into 2025, interest rate volatility remains a key concern for investors. Recent fluctuations in long-term Treasury rates have had a direct impact on asset pricing and overall investment strategies. “Long-term financing rates are also critical for how we price assets with long-term leases,” says Swann. “The uncertainty surrounding interest rates is compounded by economic factors, including potential deficit spending and the risks of future inflation.” Looking ahead, investors will need to remain flexible, evaluating opportunities, property types, and the broader economic trends to stay ahead of market shifts. “Interest rate volatility can actually benefit public REITs like W. P. Carey,” Swann notes. “We’re less sensitive to rate movements, which allows us to close deals even in volatile environments.”
What’s Next for Commercial Real Estate?
After several challenging years contending with the impacts of a global pandemic, the commercial real estate market finally seems to be healing. As noted in the latest Emerging Trends in Real Estate report from PwC and the Urban Land Institute, the Fed's 50-basis-point cut in September and subsequent 25-basis-point cut in November have generated some optimism in the CRE community that we are entering a new expansionary phase in the real estate cycle. Here are four of the top emerging trends taking shape as a result. 1. Interest Rates and Capital Cost Concerns Have Eased, but Still Remain In the aftermath of the global financial crisis of 2007-2008, the Fed attempted to revive the economy by lowering the federal funds rate to near zero. What followed was nearly a decade in which cheap debt became a way of life. However, starting in the spring of 2022, with inflation surging, the federal funds rate was increased 11 times, pushing the rate from zero to over 5 percent, bringing real estate investment activity to a near standstill. Reflecting on the market today, interest rates and cost of capital remain among the top concerns of respondents to the PwC Emerging Trends in Real Estate survey, but those concerns have eased since last year. While respondents largely agree that the rate cuts so far are not enough to alter deal economics fundamentally, the monetary policy movements have still injected optimism into the market. In addition, more than 80% believe that commercial mortgage rates will decrease in 2025, with 75% believing those rates will continue to decrease over the next five years. As an industry that relies heavily on leverage to get deals done, signs of lower-costing debt bode well for the future and will support more robust deal volume. That said, the Fed’s future decisions on rate cuts will depend on how inflation and the overall economic outlook evolve. 2. Acquisitions, Refinancing and Development Markets Improving The acquisitions, refinancing and development markets are slowly starting to heal, the Emerging Trends report noted, pointing to steady improvement in liquidity and more bids in the market, as well as tighter prices and debt spreads. Industry participants are also optimistic about debt conditions ahead, with lending expected to grow by 24% in 2025, indicating a full recovery to pre-pandemic levels and further signaling that normalization and stability are on the horizon. Another key factor market participants are looking at is the stabilization of recent real estate price declines. Cap rates began rising when prices peaked in mid-2022 and continued increasing until plateauing in early 2024. The most recent figures suggest prices might be turning positive again, although this may simply reflect that higher-quality real estate is accounting for a larger share of transactions. 3. Occupied Space Now Exceeds Pre-Pandemic Levels in Most Sectors The pandemic created significant changes in how tenants use space, and where. There are fewer office workers commuting to the workplace, more consumers shopping online and more goods being stored in warehouses. However, despite these changes, overall demand for space has more than recovered from the pandemic and remains robust across most property types, with the exception of office. When looking at the future of the retail market, survey respondents indicated that location is key. While newness is a significant priority for some property types like office, retail spaces tend to derive much of their value and demand based on their location. Frequently, older retail centers command the best locations, preventing newer entrants from gaining a foothold and making them more attractive to investors. In the industrial sector, net absorption has been positive, meaning more space is occupied than ever before. Yet demand has not kept pace with new supply, leading to an increase in vacant space. This has given more negotiating power to tenants, who are increasingly seeking spaces with more modern features such as high energy efficiency, LED lighting and higher clear heights. However, this “flight to quality” trend should abate slightly as the pipeline for new product slows and the supply/demand dynamics balance out. 4. There Is Less Movement Due to the High Costs of Relocation The pandemic not only created a shift in the demand for commercial property, but also shifted where people want to live and work. After years of increasing interstate migration, many areas are experiencing slower population growth or even outright population losses due to soaring home prices, fewer renters having the ability to transition to home ownership, and fewer households relocating for new jobs. The report notes that climate change is also becoming a greater factor in location decisions. The report points to a Freddie Mac analysis that shows natural disaster concerns have prompted one in seven households to consider other places to live. Many commercial properties are also at risk of damage from natural disasters and commercial property owners are facing increasing insurance premiums as a result. Conclusion As the real estate market transitions into a new cycle in 2025, we remain cautiously optimistic for the future. With change comes opportunity, and we’re excited to see how the landscape evolves as we enter a phase of recovery and renewal. With more than 50 years of experience operating in all market cycles, we’re well positioned to continue helping companies unlock otherwise illiquid capital from their real estate assets. If you're interested in learning more, contact us today.
A Resurgence of Investor Confidence
Earlier this week, real estate professionals from over 70 countries gathered in Munich for the annual EXPO Real trade fair. After a muted year of investment volume, participants were eager to meet with peers to discuss prospective deals and the outlook for the market. The mood can be best described in two words: cautiously optimistic. After rising interest rates caused months of uncertainty and volatility, attendees finally feel stability is on the horizon. Below are three key topics discussed as delegates look ahead to 2025. Interest rates on the decline Monetary policy decisions on both sides of the Atlantic were a major topic at this year’s EXPO. The European Central Bank began cutting rates this summer, followed by the Federal Reserve in September. These rate cuts are an indicator that inflation is on track to reach its target level for price stability. As a result, we’ve seen the bid-ask spread between buyers and sellers narrowing as real estate values adjust to more realistic levels. For investors waiting on the sidelines for economic clarity, this has also served as the impetus to start deploying capital into new and existing assets. At W. P. Carey, however, we would caution that investors should not focus too much on the next interest rate decision. Instead, they should consider the more important factor – long-term borrowing costs. Real estate investors typically borrow on a long-term basis given the length of their leases, so short-term rate cuts won’t have as much of an impact as some are anticipating. New sectors growing in popularity Post-pandemic challenges in sectors including office and some segments of retail have made investors far more selective in terms of capital allocation. Industrial remains among the most popular asset classes as it continues to benefit from strong market fundamentals. The e-commerce boom and logistics sector’s key role in European supply chains remain long-term growth drivers, while the emerging trend towards nearshoring will provide manufacturing and logistics with a further boost. We’re also starting to see some newer sectors growing in popularity. Self-storage, cold storage, senior living, hospitality and data centers have emerged as attractive investments, with strong operating fundamentals and positive long-term growth potential. As investors continue the flight to safety to protect returns, we expect to see a shift in the sectors – and geographic markets – receiving the most capital. An uptick in sale-leasebacks in 2025 Despite some volatility, the overall environment for sale-leasebacks remains favorable, with high-yield debt and leveraged loans continuing to be expensive. The influx of cash from a sale-leaseback remains incredibly valuable for companies, supporting debt restructuring, strengthening balance sheets and providing capital for operating expenses and growth investments. In addition, we continue to see interest from private equity firms in sale-leasebacks as a means of financing new acquisitions or bolstering the growth of portfolio companies. Last year alone, approximately 75% of W. P. Carey’s investment volume was attributable to transactions with PE-backed companies and we anticipate a significant portion of this year’s deal volume will be as well. While it will take some time for the sale-leaseback market to recalibrate and reach its new normal, we are starting to see the green shoots of a more stable industry as we gear up for a busy fourth quarter. We remain “cautiously optimistic” heading into 2025 and look forward to continuing to find opportunities to help companies unlock capital from their real estate assets.
Tenant Partnerships – The Road to a Sustainable Future
As Climate Week NYC approaches, the spotlight on sustainability is brighter than ever. For companies across industries, the annual event underscores the urgent need to address climate change. The real estate sector, estimated to be responsible for nearly 40% of global carbon emissions, plays a critical role in advancing this worldwide effort. At W. P. Carey, we recognize our potential to drive meaningful impact in the fight against climate change through our extensive portfolio of over 1,200 net lease properties. While the net lease model means our tenants have full operational control of their properties, we are committed to collaborating with them to achieve shared sustainability goals and enhance the quality of our properties. Here’s how: Gaining insights through data Collecting detailed energy data remains a core focus for us. Collaborating with our tenants to install IoT smart meter systems provides both us and our tenants access to high-quality utility data for their leased properties. This data can be utilized to assess energy usage for regulatory compliance as well as voluntary reporting. It also enables us to calculate the carbon footprint of our portfolio and identify opportunities to implement energy-saving measures at our properties. In 2023, we began a smart meter installation program with our European tenants, making the process more efficient for both W. P. Carey and our tenants while also reducing the risk of data errors. Renewable energy opportunities Renewable energy can reduce building operating costs and lower carbon emissions. One of the most accessible sources of renewable energy is solar power, which can be harnessed through the installation of solar panels. Particularly given the roof space that our industrial and warehouse assets provide, we believe we have a large addressable market for solar. Through W. P. Carey’s CareySolar® program, tenants have the opportunity to take advantage of rooftop and carport solar installations at their leased properties through a broad array of structures. These include: Landlord-operated Landlord-financed Tenant projects Rooftop leases W. P. Carey collaborates with each tenant to understand their current energy usage and determine the ideal solar solution for their unique property. In 2023, W. P. Carey extended the lease term with an existing tenant for their 265,000-square-foot industrial facility in Illinois. Simultaneously, we signed a 15-year power purchase agreement where we plan to build a 1,350-kilowatt roof mounted solar system that would offset 740 metric tons of CO2 annually. We will manage and fund the construction of the system and sell the power generated by the system to the tenant. Building energy retrofits Implementing sustainable features to improve energy efficiency has a huge impact on a property’s life-cycle emissions. W. P. Carey can do this through property-specific energy retrofits. An example of an energy retrofit is the installation of LED lighting. LED lights are 80% to 90% more energy efficient than other light bulbs and do not contain any environmentally hazardous materials. Additionally, LEDs last up to 25 times longer than traditional incandescent bulbs. In 2023, W. P. Carey completed a full LED retrofit at our 1.5 million-square-foot warehouse in University Park, Illinois. The LED project is expected to result in a 35% reduction in lighting electricity usage and 41% reduction in utility and maintenance bills at the property. Following the completion of the retrofit, we leased the property to Samsung for a term of 10.5 years. Green-building certifications Green-building certifications such as LEED and BREEAM can provide many benefits for both landlords and tenants. Achieving a green-building certification means that a property meets certain sustainability requirements across a variety of categories including energy, air quality and water usage. Certified buildings are typically more energy and cost efficient and create healthier work environments for employees. In addition to being more environmentally friendly, green-certified buildings can offer tax benefits. Many states offer tax incentives for green building projects, based on either energy savings or reaching a certain level of certification. Real estate studies have also shown that green buildings sell and lease faster than traditional buildings, and garner higher rents and lease rates. At W. P. Carey, we’re committed to achieving green-building certifications where we can, and our portfolio includes 6.6 million square feet of green-certified buildings as of June 30, 2024. In 2024, our state-of-the-art food research facility in the Netherlands received a BREEAM Outstanding certification, the highest level of BREEAM certification for buildings worldwide. Conclusion Reducing the carbon footprint of a net lease portfolio is an enormous challenge, but by bolstering tenant engagement and systematically identifying sustainability opportunities, progress is possible. Sustainable real estate is beneficial to the planet, attractive to tenants and improves the value of our broader portfolio, making it a win-win-win for all.