The net lease market today is radically different than what it was just a few years ago. The most dramatic change that has taken place is in the capital markets. Even back in the 1980s when interest rates soared, financing was available. Today, liquidity has all but evaporated and there is minimal capital available to net lease investors under terms that make good business sense. Today's financing options are predominately local and regional banks that offer recourse financing with lower loan to value ratios. As a result, the leveraged buyers unwilling to take on recourse debt are largely out of the market.

The lack of capital has caused two other major changes in the net lease market — a significant downturn in deal velocity and a dramatic decrease in deal size. The number of net lease transactions has fallen approximately 70 percent from last year and average deal size has dropped below $5 million, as opposed to $10 million twenty-four months ago.

The typical buyer today is not the REIT or other institutional investor that grabbed the attention of the trade press the past few years with high-profile deals. Some REITs are raising funds but in many cases, their focus is on recapitalizing their balance sheets. They are more likely sellers or buying down their debt rather than buying properties in today's market. Another change to the buyer base we've seen has been the decrease of the 1031 exchange buyers. The 1031 exchange deals have decreased 50% to 60% in past year. In many cases, as property values declined, the gains have disappeared and there is no longer a reason for the exchange