In a time of economic uncertainty driven by sporadic tariff policies, nagging inflation concerns, and a potential economic slowdown, some owner-users are turning to sale-leasebacks as a way to free up capital. It’s a strategy that offers benefits for business owners and investors alike, and we’ll look at both sides of the transaction to help determine if pursuing a sale-leaseback deal is right for your business.
The Big Picture
According to reports by SLB Capital Advisors, a New York-based firm that advises companies on how to extract value from their real estate assets, the volume of activity in the sale-leaseback market more than doubled, year over year, during the first quarter of 2025, to $3.82 billion. It cooled to $2.8 billion on 156 transactions in Q2, in line with activity in the last nine quarters. The largest transaction was Morgan Stanley’s $343 million acquisition of a Nissan industrial portfolio, but most deals remain in the $2.5 million to $25 million range.
Sale-leasebacks are executed across multiple property sectors, with industrial leading the way at approximately 45% of the deals (from 2021 to 2024). Retail follows at approximately 28% (but rising in the last four quarters). Healthcare, office, and “other” make up the remainder of the pie.
What is a Sale-Leaseback?
A sale-leaseback is when a business property owner sells their real estate asset to an investor and simultaneously enters into a long-term lease agreement (typically from 10 to 25 years, with renewal options equal to the initial term) with the buyer, commonly structured as a triple-net (NNN) lease where the tenant assumes responsibility for taxes, insurance, and maintenance. This strategy frees up financial resources for the seller while allowing them to retain operational control of the asset.
Benefits for Sellers
As stated above, one of the main reasons for entering into a sale-leaseback agreement is access to capital that can be used for higher and better uses, such as reducing debt, expanding operations, or other strategic investments. In a market still plagued by relatively high interest rates (even with the anticipated modest rate cuts by year’s end), tighter credit and conservative lending practices, many businesses see this as an alternative financing mechanism. Lease payments may be tax-deductible as operating expenses, potentially improving the bottom line. Finally, from a capital allocation perspective, it’s usually more advantageous for a business to concentrate on its core competency — creating goods or services — than real estate ownership.
Benefits for Investors
The primary benefit for buyers is the predictable income stream that comes with the transaction. Investors receive rental payments from the tenant, providing a stable, long-term cash flow. If the tenant has a strong credit profile and is tied to a long-term lease, the investor can avoid the risks associated with traditional debt financing. Investors can also see significant tax advantages from depreciation deductions on the property. Sale-leasebacks attract REITs, private equity funds, and private investors.
Potential Drawbacks
Owner-users considering a sale-leaseback should proceed with caution. The transaction involves analyzing multiple financial components to ensure the transaction aligns with both short-term liquidity needs and long-term operational goals. The process starts with determining the property’s fair market value, so property owners should get a fair market appraisal. An undervalued sale price can skew the economics of the deal.
Lease payments are then calculated based on lease duration, prevailing interest rates, and specific lease terms — factors that directly influence monthly cash flow and overall cost of occupancy. Special attention must also be paid to rent escalations, renewal options, and maintenance responsibilities. Tax implications also play a critical role. Sellers often benefit from deducting lease payments as operating expenses, which can reduce taxable income and improve net cash flow. Adjusting variables like lease length and interest rate can significantly impact the financial outcome, making strategic modeling essential.
Why Sellers Need a Trusted Advisor in a Sale-Leaseback Deal
Although a direct offer from a potential buyer may be enticing given the upside of a sale-leaseback deal, expert brokerage representation is essential. Here’s a breakdown of why hiring an experienced, trusted advisor/broker is a must.
It Levels the Playing Field
• Direct buyers (REITs, institutions, private investors) prioritize their own interests, not the sellers.
• Brokers can leverage market data and provide expertise in structuring lease terms that benefit the party they represent (buyer or seller).
• Without a broker, sellers often accept undervalued deals and restrictive leases due to a lack of negotiation experience.
Sale-Leasebacks Are Complex Transactions
• SLBs involve dual contracts (sale + lease), tax implications, and regulatory hurdles.
• Specialized sectors (e.g., healthcare) face added layers like HIPAA, Stark Laws, and non-competes.
• Brokers navigate these intricacies, preventing costly oversights and ensuring alignment with business goals.
Competition Drives Value
• Direct deals eliminate competitive tension, giving buyers full control.
• A broker-led marketing process introduces multiple bidders, increasing price and improving lease terms.
Lease Terms Define the Deal
• The lease — not just the sale price — determines long-term value.
• Without market comps and expert guidance, sellers may agree to steep escalations, long non-cancellable terms, or triple net leases that erode value.
• Brokers ensure lease structures reflect true market economics and protect the seller’s operational flexibility.
Bottom Line
Dealing directly may feel less complicated, but it’s often a shortcut to a less-than-optimal deal. A skilled commercial real estate broker brings market exposure, strategic structuring, and negotiation power — ensuring sellers don’t leave money or control on the table.
A sale-leaseback isn’t just a financial transaction; it’s a strategic decision. Executed properly, it can unlock growth, improve liquidity, and preserve operational control. But like any major move, it requires careful planning, expert guidance from an experienced broker/advisor, and a clear understanding of your long-term goals.
If you’re sitting on a valuable piece of real estate and wondering how to make it work harder for you, a sale-leaseback might be the key to unlocking your next chapter. Contact one of Voit Real Estate Services’ trusted commercial real estate advisors to learn more about a potential sale-leaseback as a seller or an investor.