Weary of low rates and stock market volatility?

It’s a tricky time to be an investor. Interest rates on savings accounts and Treasuries are heading toward zero and could remain low for a while. But the stock market has been volatile and is no place for the squeamish.

Where should someone turn who’s a conservative investor, but would still like to sock away a decent rate of return? Commercial real estate, especially net leased properties, is a great alternative, says Bob Moorhead, a Dallas-based managing partner at Secure Net Lease.

“When there’s market volatility, people tend to gravitate toward things that they can touch and feel,” Moorhead says. “If someone invests in a Starbucks, they know what it is, they like the brand and the product.”

Consider that some of the top names in retail — think 7-Eleven, Starbucks and McDonalds — regularly generate returns of 4% to 5%. That may not knock your socks off, but it’s certainly better than the sub-2% yield that the 10-year Treasury has generated for the past several months. Typical net leased properties sell for $1 million to $5 million and up.

And there’s plenty more to like when it comes to net-lease properties, Moorhead says. Their tenants rarely, if ever, miss a rent payment. That means their owners can count on steady income.

The tenants are also extremely stable. When’s the last time you remember a McDonald’s or a Chick-Fil-A closing a location? The Atlanta-based Chick-Fil-A may be the most reliable name in the fast-food business; the company holds no debt range.

Net leased properties can also act as a hedge against inflation, as successful locations can produce steady rent increases over the years.

It also helps that, as described by the CRE Finance Council, “consumers have taken the clear lead in sustaining the U.S. economic expansion.” Retail sales have continued to be strong and consumer sentiment has recently rebounded. Those are good signs for the types of retail tenants in net-lease spaces who depend on consumer strength.

Many investors in net-lease properties are nearing retirement and they often prefer to earmark as little of their savings as possible in the stock market. That makes net lease properties a great option for that group of investors, Moorhead says.

And the traditional safe haven for investors nearing retirement — fixed-income investments like bonds and Treasuries, simply don’t hold the same appeal as in generations past. The Federal Reserve Board on September 19 lowered the federal funds rate by 25 basis points to a target range of 1.75% to 2%. The Fed may cut rates even more this year or early next year.

It’s frustrating for the investor who wants to avoid risk but still desires a decent return. But the situation also shows how commercial real estate can be a very viable option.

Retail sales have continued to be strong and consumer sentiment has recently rebounded. Those are good signs for the types of retail tenants in net-lease spaces who depend on consumer strength.