Heading into 2021, Randy Blankstein sees one big trend for the net lease space.

“I think the big story, which bodes well for 2021, is that fundraising was really strong in the fourth quarter,” Blankstein says.

A lot of the interest has been in industrial, which has been the strongest commercial real estate performer. But across the board, interest is great across several asset classes.

“The money that has been raised is fairly substantial,” Blankstein says. “I’m pretty optimistic that the money will get deployed because the fundraising was so strong.”

Blankstein thinks hesitation with the equity markets is feeding part of this interest in net lease. “A lot of people think the equity markets got ahead of themselves last year,” he says. “So obviously, this is a competition for investment dollars, and I think people still think that there’s some relative value in this sector.”

Blankstein says Oak Street Real Estate Capital, Angelo Gordon and a number of second-tier syndicators, including Delaware Statutory Trust funds, have been among the groups that have raised funds.

“Three companies went public, private funds are being raised and smaller funds are being raised,” Blankstein says. “A lot of equity showed up towards the end of the year. And, that equity wasn’t even close to all deployed.”

With new development stymied in 2020 because of the pandemic, these groups may have some trouble finding assets to buy.

“There is going to be a shortage of the past product because you can’t create new development where it didn’t exist,” Blankstein says. “And obviously new development was kind of in flux for part of last year and that’s the prime target if people want new construction. It also has the longest lease term.”

No matter what, Blankstein says there will be a shortage of product. But low historically low cap rates could entice some owners to sell.

“People will look at valuations and say, ‘Look, this window of opportunity is still open and who knows where interest rates and other things are going in the years ahead,’” Blankstein says. “I think there will be a lot of people looking closely at dispositions in the coming years.”

Blankstein says the largest groups in the net lease space are well-capitalized and trying to make acquisitions.

“It doesn’t make sense to sell it, but I think there are other people who are for a variety of reasons recycling capital,” Blankstein says. “I think those people will be looking to sell. So I think there’ll be a lot of under-$10 million product out there on the market this year. But a lot less over $10 million, which is more institutional.”