Can You Rent to Walgreens? Breaking down Single Tenant Net Leases
Have you ever wondered who owns the building of your favorite store or restaurant? Even big name retailers are renters! To understand more about this asset class, we brought in Brandon Gayeski and Zach Wright from Blue West Capital. Listen to the episode to learn more about how these leases work and why they’re a great way to preserve wealth.

Today, we’re talking about a type of commercial lease called single tenant net leases.  These leases are a great wealth preservation strategy, especially appealing for landlords coming from the hectic world of multi family residential properties.  To break down what these leases are and how they work, we brought in Zach Wright and Brandon Gayeski from Blue West Capital based in Denver.

Blue West is a boutique net lease investment sales company providing single tenant acquisition and disposition services.  They pride themselves on being straight shooters with their clients, and have an extensive track record of selling single tenant properties in Colorado and nationally.  Zach and Brandon are detail-oriented, hard workers for their clients who were happy to sit down with us and explain more about this asset class. 

Three Learning Options!
  1. Listen to the podcast “#341: Can You Rent to Walgreens? Breaking down Single Tenant Net Leases” on the Denver Real Estate Investing Podcast
  2. Watch the YouTube video (at the bottom).
  3. Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.

What Is a Single Tenant Net Lease Investment Property?

A single tenant net lease investment property is a freestanding building leased to one tenant, such as McDonald’s or Walmart.  Often, big stores don’t own properties and lease them out instead: the overwhelming majority of retailers are tenants.

Generally, these buildings are leased on a long-term basis to these tenants.  Leases typically run anywhere from 10-25 years with numerous renewal options. 

What Do Single, Double, and Triple Net Leases Entail?

Essentially, it means how much the tenant is responsible for paying.  In residential properties, the landlord is responsible for taxes, insurance, and maintenance, making them responsible for any issues that come up.  This isn’t the case with net leases, where some of these responsibilities get passed onto the tenant. 

With a single net lease, the tenant pays the property taxes, while the landlord remains responsible for insurance and maintenance.

In double net leases, the tenant is responsible for property taxes and insurance, while the landlord is responsible for most maintenance.  Maintenance responsibilities for these types of leases typically include things like the HVAC system or parking lot.  In a new construction property, the landlord has a warranty for the part of the maintenance that falls under their purview. 

Triple net leases are the most attractive to landlords because the tenant is responsible for all taxes, insurance, and maintenance of the common area and building.  If an issue occurs, such as a leaking roof, the tenant is responsible for fixing it without a call to the landlord. 

What Type of Investor Owns a Single Tenant Lease Investment Property?

Many investors acquire these properties through 1031 exchanges.  Often, these investors are switching asset classes from multi family residential properties, though some also come from shopping centers or land, such as farms.  In an average sampling of 10 deals, 8 were 1031 exchanges, and half of those were multi family landlords. 

One of their clients is a Texas investor who owns a number of residential buildings and is ready for the ease of ownership and lifestyle change that comes with less hands-on real estate.  At one point, he had to put the acquisition of his new property on hold because the HVAC unit went out at one of his buildings and he had to scramble to resolve the issue.  This was a good reminder of why he was ready to make the switch to single tenant leases. 

What Is the Main Appeal of Owning This Asset Class?

The appeal of these properties isn’t cashflow but wealth preservation.  This is a great option for investors getting into a stage of life where they’ve made a significant amount of money and are ready to slow down.  Single tenant properties don’t require day to day management and allow investors to remain in real estate while switching to a passive investing strategy.

What Happens When a Tenant Moves out of a Property?

In apartment buildings, landlords don’t tend to be concerned when a tenant leaves because it’s easy to fill the vacancy.  Single tenant properties are more difficult to fill, so they require more evaluation on the front end.

When evaluating potential investments, it’s important to look at the sales information of the location, or even cell phone tracking data to see how many customers are visiting the property.  Zach and Brandon say that they aren’t just underwriting the building itself but the tenant’s business, as well. 

Savvy investors will look at the long-term and think about what the property will look like in 20 or 30 years. 

How Do Single Tenant Lease Properties Compare to Apartments Buildings in Denver?

For apartment buildings, landlords pay all taxes, insurance, and maintenance and generally have a cap rate between 5-6%.  For single tenant leases, it varies depending on the location and tenant, but top tenants usually generate about 3.5-6% cap rate.  The market is very limited with supply, as we’ve seen in other asset classes, and cap rates are at historic lows.

In Denver, investors can focus more on short-term deals as shorter leases will demand a higher cap rate.  Tenants such as dollar stores can generate cap rates in the 5-7% range. 

What Real Estate Fundamentals Are Used to Evaluate These Properties?

Location is a big factor.  Is the property on an intersection?  Is there good access?  What are the demographics of the area, and how is it changing?  How easy would it be to fill with another tenant?

Rent level also plays a big role.  If the rent is really high and not replaceable, landlords don’t have much leverage.  Alternatively, below market rents aren’t necessarily a bad thing but actually preferred.  It’s important to look at the tenant and see what other businesses they own.  Not all big name stores are owned by corporate; they’re often franchised. 

How Do Agents Source These Properties?

When hired to sell this property type, Brandon and Zach price it aggressively, but not too high that no one will buy it.  There are so few properties available right now that each listing can generate 20 or so offers to choose from. 

Because of the high level of competition, about half of their deals are off-market.  Often, developers will get in touch with them or their network of relationships will reach out with sellers who don’t want to go on market. 

Due to the start of Covid, tenants were concerned about an uncertain future and terminated or put on hold many new construction deals.  This created a lag in the amount of supply, which is just starting to get back on track.

How Has Covid Impacted the Industry?

Overall, this is a remarkably resilient industry.  Long-term leases with good tenants generally did well, some better than others.  Businesses deemed essential, such as groceries stores, drug stores, fast food restaurants, and gas stations, thrived.  Many of these businesses are even expanding. 

Of course, some businesses were hard hit, such as gyms and theaters. Buyers could probably purchase these buildings at a discount.   

Covid accelerated business models, and they see investors chasing places deemed essential and that always paid rent. 

Colorado is very attractive on a national level for investors because the demographics support stronger deals.  Properties in Colorado are trading for as big a premium of any other state outside of California.  While the much of the business is in the Denver metro area, Brandon and Zach remind us that a rising tide lifts all ships.  For instance, someone driving from their Denver home to a mountain cabin will need to stop for gas and supplies along the way, which helps businesses throughout the state. 

Connect with Brandon and Zach

If you want to learn more about this type of asset class or want to find a property, go to their website: or reach out to Brandon and Zach at [email protected] and [email protected].

Connect with Us

If you have questions about this and other asset classes, reach out to us.  We’d be happy to sit down with you and form an investing strategy

YouTube Video

Can You Rent to Walgreens? Breaking down Single Tenant Net Leases

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Chris Lopez
Chris Lopez is a Denver area real estate entrepreneur and investor, as well as the host of Bigger Pockets’ House Hackerz and the Denver Real Estate Investing Podcast.
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