Triple Net Lease Opportunities in Convenience Stores and Gas Stations

Investing in triple net (NNN) leases offers various opportunities, from stable income to hands-off involvement. However, as you’d expect, the performance and stability of an NNN lease is dependent on several factors, such as the asset class.

One category that offers plenty of additional benefits is convenience stores and gas stations.

These types of retail properties have unique features that result in predictable returns and tenant stability. Below are some insights to help you understand why these assets can be excellent additions to your portfolio.

Triple Net Lease Convenience Stores and Gas Stations: Ideal for the NNN Model

The NNN lease structure transfers financial responsibility from the landlord to the tenant, specifically for three net operating expenses: property taxes, insurance, and maintenance costs. Convenience stores and gas stations are perfect fits for this model because of the following reasons.

• High Demand and Consistent Traffic: One of the most beneficial characteristics of these property types is that gas and convenience stores are necessities. Even when inflation or other economic issues arise, people will still have a consistent demand for these goods, resulting in stable traffic.

• Long-term Leases: National and regional operators of these businesses often sign long-term leases lasting 5 to 25 years, which are typically the preferred arrangement in NNN leases.

• Strong Credit Tenants: Well-known brands such as 7-Eleven, Circle K, or major fuel companies often back these leases, reducing the risk of default.

Location and Tenant Strength

Two major factors to consider when selecting NNN convenience stores or gas station investments are location and tenant strength. Properties located in busy intersections, near highways, or growing suburban developments are often prime investment opportunities. Tenants that have brand recognition are also ideal choices. These companies tend to have financial backing that leads to a stable lease.

Advantages of Triple Net Lease Gas Stations and Convenience Stores

With the features we outlined, these are some of the benefits you can expect when investing in this retail sector.

• Recession Resilience: Due to the essential nature of the products offered at these properties, convenience stores or gas stations remain in demand no matter the economic conditions.

• Passive Income: With tenants covering most expenses, landlords enjoy true hands-off management.

• Stable Yields: Gas stations and convenience stores often have lower cap rates ranging from 6–7%, which indicates stability for the long-term.

• Future-proofing Through Adaptation: Many companies are already upgrading locations to include electric vehicle (EV) charging stations, drive-thru options, or expanded food service, helping ensure continued relevance.

Risks To Consider

Apart from the more well-known risks of NNN properties, gas stations and convenience stores have additional challenges you’ll want to consider. The most impactful of these is the changing environmental regulations, especially with gas stations. Environmental liability is a unique concern due to underground fuel storage tanks, though most leases place remediation responsibility on the tenant. It’s important to properly negotiate this possible expense before committing to the NNN lease to avoid surprises in the future.

Wrapping Up: NNN Investing in Convenience Stores and Gas Stations

Convenience stores and gas stations are excellent NNN lease properties because of features like stability in various economic conditions, consistent demand, and long-term adaptability. When you invest in a property in a good location, the chances of high yields also increase. While there are a few risks to plan for, these properties still offer a lot of promise that often makes them a worthwhile inclusion in real estate investment portfolios.

Sources:

https://gasvaluation.com/what-you-should-know-about-cap-rates/

https://www.forbes.com/councils/forbesfinancecouncil/2024/10/22/triple-net-real-estate-a-safe-haven-in-a-volatile-market/

https://www.forbes.com/councils/forbesbusinesscouncil/2024/09/04/how-triple-net-leases-nnn-can-unlock-stability-and-profit-in-commercial-real-estate/