National Retail Properties, Inc. (NNN): PESTLE Analysis [Nov-2025 Updated]

You're smart to look past the simple dividend yield on National Retail Properties, Inc. (NNN); the real story for 2025 isn't just their resilient triple-net model, but how they navigate a high-rate economic environment. The direct takeaway is that while their industry-leading occupancy, holding near 99.4%, provides a strong floor, the rising cost of capital is the biggest threat to their growth engine, potentially stalling new acquisitions and making the projected Adjusted FFO (AFFO) of around $3.45 per share harder to achieve. We're breaking down the six macro forces-from shifting property tax laws to the consumer's pivot toward experience-based retail-that will defintely determine whether NNN can continue its decades-long dividend streak.

National Retail Properties, Inc. (NNN) - PESTLE Analysis: Political factors

Shifting state-level property tax laws impacting operating expenses

The political landscape at the state and local level is a key factor, even for a triple-net lease (NNN) REIT like National Retail Properties, Inc., where the tenant is contractually obligated to pay property taxes. While NNN does not directly pay these taxes, a sharp increase can erode a tenant's profit margin, raising the risk of default or hindering their ability to pay contractual rent escalations. This is a critical risk in NNN's largest markets.

For the 2025 fiscal year, we see specific legislative relief in high-tax states. In Texas, which holds the largest percentage of NNN's Annual Base Rent (ABR) with 592 properties as of September 30, 2025, the state implemented a temporary 'Circuit Breaker' Appraisal Cap. This limits the annual increase in appraised value for non-homestead commercial properties valued at $5 million or less to just 20% for the 2024-2026 period. This action provides a defintely needed buffer for many of NNN's smaller, single-tenant retail properties in the state.

Conversely, in states like Colorado, the nonresidential assessment rate is undergoing a gradual reduction from a prior rate of 29% to 25% by 2027, but the rate for 2025 is set at 27%. This gradual, politically negotiated reduction offers long-term stability but still requires tenants to manage the higher 2025 rate before the full benefit is realized.

Zoning and land-use regulations affecting new development or redevelopment

Local political decisions on zoning and land-use regulations directly influence NNN's growth and asset management strategy, particularly its ability to create value through redevelopment. The general trend is toward greater flexibility, often driven by political pressure to address housing shortages.

In Texas, for example, legislation aims to ease rezoning requirements to permit mixed-use and residential development on commercial properties, including former shopping centers. This is a significant opportunity for NNN to reposition a non-performing asset by selling it for a higher value to a residential developer or by undertaking a mixed-use redevelopment itself. In Florida, updates to the Live Local Act in 2024-2025 are promoting mixed-use projects by limiting the non-residential square footage requirement to no more than 10% of a project's total, alongside defining building height defaults (capped at 10 stories). This regulatory shift enhances the residual value of NNN's land holdings in these high-growth states.

• Opportunity: Adaptive reuse legislation in states like Texas and Florida increases the potential exit value of older, single-tenant assets.
• Risk: Local political opposition can still delay or block site-specific variances and conditional use permits, adding months to a project timeline.

Federal interest rate policy indirectly influenced by political stability

The Federal Reserve's (Fed) interest rate policy, while technically apolitical, is heavily influenced by the political and fiscal environment, especially in an election year. This environment directly impacts NNN's cost of capital and its investment spread (the difference between its cost of borrowing and its acquisition cap rate).

As of late 2025, political pressure and the economic impact of new tariffs contributed to the Fed's cautious stance. The Federal Funds Rate was lowered to a target range of 3.75%-4.00% following a 25 basis point cut in October 2025. This rate environment is still higher than the pre-2022 average, but the trend toward easing is favorable for a capital-intensive REIT.

Here's the quick math on NNN's debt structure as of September 30, 2025:

The long weighted average debt maturity of 10.7 years is a strong defense against short-term political volatility that could push the Fed to unexpectedly hike rates to combat inflation caused by new trade tariffs.

Government stimulus programs affecting consumer spending and retail tenant health

Federal and state fiscal policies are a direct input into the financial health of NNN's retail tenants, which in turn dictates rent collections and occupancy (which was 97.5% as of Q3 2025). The focus has shifted from broad federal stimulus to targeted state-level programs in 2025, such as New York's $200-$400 rebates for middle-income households and Colorado's $1,154 tax credits for retirees. These targeted measures provide a modest, localized boost to consumer discretionary spending, which is vital for NNN's tenants like convenience stores and restaurants.

More impactful for NNN's corporate structure and investment strategy are the federal tax policy changes in 2025:

• Bonus Depreciation: The permanent restoration of 100% bonus depreciation for qualifying property placed in service after January 19, 2025, significantly enhances the after-tax returns on new property acquisitions and capital improvements for NNN.
• REIT Subsidiary Flexibility: Effective January 1, 2026, the asset test limit for a Taxable REIT Subsidiary (TRS) will increase from 20% to 25% of the REIT's total asset value. This political change gives NNN more flexibility to operate non-real estate activities, such as property management or development services, within a subsidiary, potentially increasing its overall operational efficiency and income streams.

National Retail Properties, Inc. (NNN) - PESTLE Analysis: Economic factors

You are right to focus on the economic factors right now; they are the biggest headwind for any net lease real estate investment trust (REIT) like National Retail Properties. The core challenge is the cost of money, which directly pressures their acquisition strategy and, by extension, future growth. Still, NNN's balance sheet strength gives them a defintely necessary buffer.

High interest rates increasing the cost of capital for property acquisitions

The elevated interest rate environment, a deliberate tool used to cool inflation, has dramatically increased the cost of capital for NNN. For a REIT that relies on an accretive spread-buying properties at a higher capitalization rate (cap rate) than their cost of debt-higher rates compress that profit margin, making new acquisitions less profitable. The Federal Reserve's actions have pushed commercial financing rates higher, though a recent moderation is a positive sign.

For NNN, the impact is less on their existing debt, which has a favorable weighted average interest rate of 4.1% and an impressive weighted average maturity of 11.6 years as of March 31, 2025. Plus, only 2.5% of their debt is floating rate, which minimizes the risk of sudden interest expense spikes. The real pressure is on new deals.

Here's the quick math on the acquisition environment:

• New Acquisition Cap Rate: Initial cash cap rate for Q1 2025 investments was 7.4%.
• NNN Financing Rates (Oct 2025): Competitive debt rates for NNN properties have dropped to a range of 5.75%-6.5%.
• Impact: The spread between the acquisition yield (7.4%) and the cost of debt (5.75%-6.5%) is still positive, but it is tighter than in the low-rate environment of a few years ago.

Projected 2025 Adjusted FFO (AFFO) per share of around $3.45

Despite the high-rate environment, National Retail Properties has maintained a stable outlook, which speaks to the resilience of their triple-net lease model. Management's latest guidance, updated in November 2025 following Q3 results, projects the full-year Adjusted Funds From Operations (AFFO) per share in a range of $3.41 to $3.45. AFFO is the key metric for a REIT, representing the cash flow available to cover dividends and fund growth, and this projection is a testament to consistent performance.

This guidance is supported by a planned acquisition volume for 2025, which was increased to a range of $850 million-$950 million. The company closed $748.0 million in investments year-to-date through Q3 2025, showing they are actively deploying capital and finding deals that work.

Inflationary pressures driving up construction and maintenance costs

Inflation is a double-edged sword. On one hand, the triple-net (NNN) lease structure is a strong hedge because the tenant is responsible for property taxes, insurance, and maintenance, shifting the rising cost burden away from NNN. On the other hand, inflation still matters when a property becomes vacant and NNN needs to renovate it for a new tenant (re-tenanting). Construction cost inflation for Nonresidential Buildings is forecast at approximately +4.2% for 2025, which increases the capital expenditure (CapEx) required to get a vacant property back on the market.

The good news is that many of NNN's leases have contractual rent escalators, often tied to a Consumer Price Index (CPI) or fixed annual increases, which helps rental income keep pace with general inflation. Annualized Base Rent (ABR) increased by 7.2% over the prior year in Q3 2025.

Recessionary risk impacting tenant sales and rent coverage ratios

A potential economic slowdown or recession poses a direct threat to the financial health of NNN's tenants, especially those in the retail and restaurant sectors. If tenant sales drop, their ability to cover rent-the rent coverage ratio-falls, increasing the risk of default and vacancy. NNN's portfolio is highly diversified across over 3,600 properties and more than 350 tenants.

The company's occupancy rate remains robust at 97.7% as of Q1 2025, which is only slightly below its 20-year average of 98.2%. This high rate shows the portfolio's stability, but they are still managing tenant issues. For instance, NNN took back possession of 64 properties from one midwestern restaurant operator and 35 properties from a southeastern U.S. furniture retailer that filed for bankruptcy in 2024.

This table summarizes the key economic metrics for NNN:

National Retail Properties, Inc. (NNN) - PESTLE Analysis: Social factors

You're looking at National Retail Properties, Inc. (NNN) and trying to map the macro social trends that will actually hit the bottom line, not just the headlines. The key takeaway for 2025 is that NNN's focus on necessity and service-based retail, like quick-service restaurants and car washes, is a direct hedge against the consumer's shift away from traditional goods, but the persistent labor shortage is a real operational headwind for your tenants.

Consumer preference shift toward experience-based retail over traditional goods.

The consumer wallet is defintely moving from stuff to experiences. Retail executives surveyed for 2025 overwhelmingly expect consumers to prefer spending on experiences over goods (80%). This doesn't mean the physical store is dead; it means the store must offer a service, convenience, or an experience that e-commerce can't replicate. The good news for NNN is that approximately 80% of retail transactions still happen in physical stores, but those stores are evolving into destinations.

NNN's portfolio has an inherent advantage here because its tenants are largely service-oriented or necessity-based, which are naturally more resistant to e-commerce. For example, your portfolio includes tenants focused on experiences and services, which are critical to this shift:

• Tidal Wave Auto Spa accounts for 1.4% of Annualized Base Rent (ABR).
• Super Star Car Wash accounts for 1.3% of ABR.
• Lifetime Fitness accounts for 1.3% of ABR (as of Q1 2025).

This exposure to non-discretionary, service-based retail, which can't be delivered by a drone, is a strong structural tailwind. It's a simple risk mitigation strategy: own the places people have to go, or want to go for an activity.

Demographic migration patterns affecting property demand in Sun Belt states.

The Sun Belt migration trend is a massive, multi-decade demographic shift that directly supports NNN's long-term growth. The region accounted for 80% of total U.S. population growth in the last decade and is projected to add another 11 million people (+7.3%) over the next ten years. Texas alone added over 560,000 residents in 2024, pushing its population past 31 million.

Here's the quick math: more people equals more demand for necessity-based retail. NNN's portfolio of 3,697 properties spans all 50 states, giving it a national footprint that captures this migration. However, what this estimate hides is the potential for retail supply lag. In fast-growing Sun Belt cities like Austin, retail square footage per capita has actually declined by 11 SF since 2020, even with population growth. This supply-demand imbalance in high-growth markets means existing, well-located properties-like those NNN owns-should see strong pricing power at renewal and higher demand for new acquisitions.

Increased demand for convenience-focused retail (e.g., quick-service restaurants).

The demand for convenience, driven by time-starved consumers, is accelerating the growth of quick-service restaurants (QSRs) and convenience stores. These tenants are a core part of NNN's strategy, offering drive-thrus and easy access which are paramount to modern convenience.

While NNN's portfolio is highly diversified across 37 different lines of trade, convenience-focused tenants are among its largest exposures. Convenience Stores, for instance, are the largest industry concentration in the portfolio, and a major tenant like Casey's General Stores represents 1.6% of ABR as of Q2 2025.

This is a low-risk segment because QSRs are typically lower-cost options for consumers and are less sensitive to economic downturns. Their single-tenant, net-lease structure also makes them highly desirable assets for NNN to acquire, evidenced by the $748.0 million in investments NNN made in the first nine months of 2025.

Labor shortages in the service sector affecting tenant operating hours and revenue.

The biggest near-term risk to your tenants, and therefore to NNN's rent collection, is the persistent labor shortage (also called a tight labor market). Roughly 61% of small and mid-sized business owners reported being impacted by labor shortages in 2025. This is not a vague concern; it translates directly into lost revenue for your tenants.

The service sector, which includes most of NNN's tenants, faces the highest turnover. The food service subsector saw a separation rate (turnover) of 5.2% in December 2024, and retail was 3.9%, both significantly above the 3.3% cross-industry average. High turnover costs an estimated $2,700 per new hire.

The operational impact is clear:

• Lost Sales: 77% of frontline workers surveyed in March 2025 said their stores regularly lose sales due to poor staffing or scheduling.
• Reduced Hours: 51% of associates report their store is understaffed during busy periods, leading to frustrated customers and often reduced operating hours, which cuts into revenue.

NNN's triple-net lease structure shields it from the direct operating costs, but a struggling tenant is a risk to rent payment. The tight labor market is a real operational constraint for the QSRs and service providers that make up the portfolio.

National Retail Properties, Inc. (NNN) - PESTLE Analysis: Technological factors

As a triple-net lease REIT, National Retail Properties, Inc. (NNN) operates with a minimal operational burden, but you cannot ignore the technology adoption of your tenants. Their technological strength directly translates into their business health, which secures your long-term, stable rent checks. The key technological factors for NNN in 2025 are not about NNN's own IT department, but about how its tenants-primarily convenience stores, auto services, and restaurants-use technology to stay profitable against digital disruption.

The tech landscape for your portfolio is a near-term risk and a long-term opportunity, especially considering NNN's high occupancy rate of 97.7% as of March 31, 2025. You need your tenants to be tech-savvy to maintain that performance.

E-commerce competition requiring tenants to adopt omnichannel strategies

The biggest technological challenge for NNN's tenants is the shift to e-commerce, which demands a seamless omnichannel (multiple channels) strategy. For a convenience store or a quick-service restaurant (QSR), this means integrating the physical store with digital channels for ordering and fulfillment. This is a survival mechanism, not a luxury.

Research shows that 73% of retail shoppers are now engaging with multiple channels during their shopping journey. For NNN's portfolio, this manifests in:

• Click-and-Collect Growth: The 'click-and-collect' market, which includes curbside pickup and Buy Online, Pick Up In-Store (BOPIS), is projected to reach $154.3 billion in 2025, representing 19.9% of multichannel e-commerce sales. Your quick-service restaurant tenants, like those in the Flynn Restaurant Group, must have dedicated pickup windows or parking spots to capture this revenue.
• Retention and Sales Boost: Companies employing omnichannel strategies see an 89% increase in customer retention. This stability is critical for NNN, as a retained customer base means a retained tenant, securing the long-term lease.

So, the risk of a tenant failing to invest in a mobile app, digital ordering kiosks, or dedicated fulfillment space directly increases the risk of a future vacancy for NNN. Honestly, a tenant without a strong digital presence in 2025 is defintely a red flag.

Use of predictive analytics for site selection and portfolio management

National Retail Properties' disciplined acquisition strategy is heavily reliant on advanced data analytics, even if the process is not explicitly branded as 'AI-driven.' The company's success in acquiring properties at a competitive initial cash cap rate of 7.4% and an average lease term of over 17 years on its 2025 investments suggests a deep, data-driven understanding of micro-market fundamentals.

The technology here involves sophisticated predictive analytics that moves beyond simple demographic data. It integrates:

• Probabilistic Customer Data: Using algorithms to predict consumer behavior based on mobile device data, traffic patterns, and social media activity. This helps NNN and its tenants understand why people stop at one convenience store versus another.
• Micro-Market Correlation: Analyzing the correlation between residential demographics, nearby employment centers, and specific retail demand to forecast a property's long-term earnings potential. This is how you ensure a 17-year lease is not a liability.

Here's the quick math: NNN invested over $460 million in 127 properties in the first half of 2025. This scale of investment requires a tech-enabled, repeatable process to vet thousands of potential sites quickly and accurately, far beyond what a traditional broker network can provide alone.

Smart building technology reducing utility costs in new or renovated properties

The rise of smart building technology (PropTech) is a major technological factor, even though NNN's triple-net lease structure means tenants pay for operating expenses, including utilities. When a tenant's costs are lower, their profitability is higher, which makes their rent payment more secure for NNN.

Smart technology, such as Internet of Things (IoT) sensors and Artificial Intelligence (AI) for building management systems (BMS), is becoming standard for new commercial properties in 2025. This technology directly impacts your tenants' bottom line:

The global smart building market is projected to reach $92.5 billion in 2025, driven by a desire for efficiency and sustainability. While the tenant pays the utility bill, NNN benefits from a more resilient tenant who can better manage the $3 per square foot annual utility cost (based on the JLL 3-30-300 Rule). Your focus should be on encouraging tenants to adopt these technologies, especially in new builds or major renovations.

Digital payment trends influencing physical store layouts and efficiency

Digital payment trends are actively reshaping the physical store experience, directly impacting the efficiency and layout of NNN's properties, particularly its convenience stores, which make up 17.0% of the portfolio.

The goal is to eliminate friction at the point of sale. Consumers expect speed and ease of use, with 70% citing this as a driver for digital payment adoption. This push for speed translates into physical changes:

• Mobile and Self-Checkout: The rise of mobile wallets (Apple Pay, Google Wallet) and self-checkout kiosks allows stores to reallocate labor and space. A convenience store can replace a traditional cashier station with two or three self-service terminals, increasing throughput without expanding the physical footprint.
• Embedded Payments: Portable technology integration, like mobile Point-of-Sale (POS) terminals, enables staff to process payments anywhere in the store, supporting experiential retail and reducing the need for large, fixed checkouts. This frees up valuable floor space for higher-margin products.

For NNN, this is a positive trend: a more efficient store is a more profitable store, and a profitable tenant is a reliable tenant. The shift to digital payments is making the physical store more productive per square foot, which is the ultimate measure of a successful retail location.

National Retail Properties, Inc. (NNN) - PESTLE Analysis: Legal factors

The legal landscape for a diversified triple-net lease (NNN) REIT like National Retail Properties, Inc. is a complex web of state, local, and federal regulations. For a company operating in all 50 states as of March 31, 2025, this regulatory patchwork presents a constant management challenge. The core risk is that new protections for commercial tenants and evolving federal tax rules could erode the predictable, low-management nature of the triple-net model.

Landlord-tenant laws varying significantly by state, complicating lease enforcement.

The biggest legal friction point for a national landlord is the lack of a uniform commercial landlord-tenant code. The triple-net lease model is built on the tenant taking on nearly all property-level responsibilities and costs, but state-level legislation is increasingly challenging this assumption, especially for smaller tenants. Honestly, you can't manage a portfolio of thousands of properties across 50 jurisdictions with a single playbook.

In 2025, we are seeing a clear trend of enhanced commercial tenant protections, which mirrors residential law. For example, some jurisdictions are now requiring landlords to provide longer notice periods for rent increases or lease terminations for small businesses. In California, new laws like Senate Bill No. 1103 bestow specific rights on 'qualified commercial tenants' (like microenterprises with five or fewer employees or restaurants with fewer than 10 employees), including a 90-day notice for rent increases over 10%. This is a direct operational challenge because it adds complexity and time to the eviction and re-leasing process, which can impact NNN's high occupancy rate, which was 97.7% as of March 31, 2025. You must be defintely proactive in updating your lease templates for each state.

Potential changes to 1031 Exchange rules affecting property disposition strategies.

The Internal Revenue Code Section 1031 (Like-Kind Exchange) is a crucial mechanism for real estate investors, including NNN, as it allows for the deferral of capital gains tax when selling one investment property and reinvesting the proceeds into another. This tax-deferral feature makes NNN properties, particularly smaller ones, highly attractive to individual investors and buyers, which supports NNN's disposition pricing.

The near-term risk lies in the proposed changes within the President's 2025 budget, which aims to cap the deferred capital gains from like-kind exchanges. Specifically, the proposal suggests limiting the deferral to an aggregate amount of $500,000 for each taxpayer (or $1 million for married individuals filing a joint return) each year. Here's the quick math: if a significant portion of your buyers rely on the 1031 exchange for transactions over this proposed cap, the buyer pool shrinks, and the premium you get on dispositions could fall. NNN completed 56 property dispositions for the nine months ended September 30, 2025, with net sale proceeds of over $41.3 million (for 23 properties sold in Q3 2025). Any change that dampens buyer demand for these assets is a direct threat to capital recycling efficiency.

Environmental, Social, and Governance (ESG) reporting mandates for publicly traded REITs.

ESG reporting is rapidly moving from a voluntary best practice to a mandatory legal requirement for publicly traded REITs. This shift is driven by the SEC's proposed climate disclosure rules and state-level mandates. For instance, California's Senate Bill No. 253, the Climate Corporate Data Accountability Act, requires public and private companies doing business in California with annual revenues greater than $1 billion to disclose their greenhouse gas emissions, including Scope 3 (value chain) emissions. Reporting for the 2025 fiscal year is expected to begin in 2026. This is a significant compliance cost.

While the real estate industry is ahead of the curve-Nareit reports that 98% of REITs already release a stand-alone sustainability report-the new rules demand rigor and third-party assurance. The average corporation is spending around $677,000 annually on sustainability and ESG-related reporting. NNN must allocate capital to enhance data collection on tenant-occupied properties, which is challenging under a triple-net structure where the tenant controls utility data. The compliance table below shows the key mandates impacting NNN.

Americans with Disabilities Act (ADA) compliance costs for older properties.

The Americans with Disabilities Act (ADA) Title III requires commercial facilities and places of public accommodation, which includes nearly all of NNN's retail properties, to be readily accessible to individuals with disabilities. For NNN, which owns a large portfolio of existing, often older, single-tenant properties, the risk is not just federal compliance but the rising tide of private 'drive-by' lawsuits.

While NNN's triple-net leases typically assign the primary responsibility for ADA compliance and maintenance to the tenant, the property owner (NNN) remains a named party in most lawsuits and ultimately liable if the tenant defaults or fails to make 'readily achievable' barrier removals. Fines for non-compliance can reach tens of thousands of dollars per violation, and legal experts predict ADA Title III lawsuits will exceed 9,000 through 2025. What this estimate hides is the cost of legal defense and settlement, even when the lease assigns responsibility to the tenant. As of January 31, 2025, NNN reported that its management was not aware of any non-compliance that would have a material adverse effect on the business, but this is a perpetual, property-level risk that requires continuous lease enforcement and property monitoring.

• Review and audit lease provisions for ADA cost allocation annually.
• Implement a mandatory tenant disclosure policy for any ADA-related litigation.
• Budget for capital expenditures to cure tenant-defaulted ADA issues.

Next step: Legal Counsel: Draft a memo detailing the financial impact of the proposed $500,000 1031 exchange cap on the Q4 2025 disposition pipeline by end of next week.

National Retail Properties, Inc. (NNN) - PESTLE Analysis: Environmental factors

You're looking at the Environmental factors for National Retail Properties, Inc. (NNN) and the main takeaway is simple: the triple-net lease model pushes the operational risk onto the tenant, but the financial risk-specifically rising insurance premiums and climate-driven tenant distress-still flows back to the landlord. The key is in NNN's geographic diversification and their push for tenant-led sustainability, which is a smart, low-CapEx defense against a changing climate.

Increased focus on climate risk assessment for properties in coastal or flood-prone areas.

Climate risk is no longer a distant threat; it's a 2025 underwriting factor. NNN manages this by monitoring natural disasters and enforcing strict insurance mandates, especially in high-risk regions. Their portfolio of 3,697 properties across 50 states as of September 30, 2025, is geographically diversified, but a significant portion of their annual base rent (ABR) comes from states like Florida and Texas, which are ground zero for extreme weather events.

NNN's process requires tenants in federally designated flood zones (Special Flood Hazard Areas) to carry flood insurance through the National Flood Insurance Program (NFIP) or private carriers. They also require earthquake insurance in high-risk seismic areas. This is a crucial layer of protection, but honestly, what this estimate hides is the systemic risk: an estimated 13 million properties nationwide face substantial flood risk, and not all of them are in the official, mandated FEMA zones. You have to assume the actual climate exposure is higher than the regulatory minimum.

Extreme weather events causing property damage and insurance cost hikes.

The biggest near-term financial lever here isn't the property damage itself-the tenant is responsible for that under a triple-net lease-but the soaring cost of property insurance. Across the commercial real estate sector, insurance is now the fastest-growing operating expense. Replacement cost valuations rose by 5.5% nationwide from January 2024 to January 2025, which directly pushes up premiums.

In high-risk markets like Florida, where NNN has a significant presence (e.g., 271 properties in Florida as of mid-2025), insurance carriers are limiting coverage or exiting the market. When premiums double, the tenant's operating costs spike, increasing the risk of lease default and vacancy for NNN. It's a classic second-order risk: the tenant pays the bill, but NNN carries the vacancy risk.

Tenant demand for energy-efficient buildings and green lease provisions.

NNN actively works with its large, sophisticated tenants to promote sustainability, even though the triple-net structure limits the landlord's direct operational control. They use 'green leases' to encourage resource reduction, and they are starting to see results in their reporting.

As of September 30, 2025, the total annualized base rent for all leases was $912,218,000. We can track the engagement by looking at the ABR contribution from their top tenants who publicly report sustainability data. This shows a clear alignment with major, long-term partners.

This 19.2% of ABR from tenants with public sustainability programs is a strong indicator of portfolio quality and future-proofing. Plus, NNN now includes specific requirements in new and renewing leases:

• Energy usage reporting for new and renewing tenants.
• Energy efficiency requirements, including EPA ENERGY STAR standards.
• Environmental conservation and green building requirements.

This is defintely a soft-power approach, but it's the most effective one available in the triple-net space. You can't force a tenant to upgrade, but you can embed the expectation in the contract.

Regulatory pressure to reduce carbon footprint across the real estate portfolio.

The regulatory push for carbon reduction hits NNN primarily in Scope 3 emissions, which are the indirect emissions from their tenants' operations. Because of the net lease structure, NNN has no direct control over the energy use in 3,697 properties. This means their Scope 3 emissions are 100% estimated using industry averages, like the CBECS 2018 median intensities.

To be fair, they are leading by example where they do have control: their Orlando headquarters is EPA ENERGY STAR certified, using 35% less energy and generating 35% fewer greenhouse gas emissions than a typical building.

NNN has also purchased carbon offsets to cover their estimated Scope 1 and 2 emissions from the headquarters, plus the Scope 2 emissions from vacant properties. This is a small, but tangible, commitment to managing their direct footprint.

What this estimate hides is the power of NNN's long lease duration-an average of over 10 years-which mitigates near-term economic volatility. Still, you need to watch those interest rate movements, because that's the biggest lever on their acquisition strategy.

Next step: Have your team model the impact of a 50 basis point increase in the 10-year Treasury on NNN's weighted average cost of capital (WACC) by the end of the week.