KBRA releases research examining the growing role of development programs across the U.S. net lease real estate investment trusts (REIT) sector. Net lease REITs are firmly in growth mode as of midyear 2026, supported by positive trading premiums to net asset value (NAV) that facilitate accretive external growth. Alongside traditional acquisitions, larger net lease REITs have built development pipelines totaling approximately $2.9 billion, up substantially from $845 million at year-end 2021. In KBRA’s view, favorable development economics relative to acquisitions are positioning development as a more durable complement to acquisition-led growth.

The increased focus on development reflects several factors, including narrower spreads between acquisition yields and the cost of capital, higher development yields relative to acquisitions, competition from alternative capital for stabilized assets, and the pullback in regional bank construction lending. Development projects can typically generate going-in yields 25 basis points (bps)-50 bps above acquisition cap rates, while allowing REITs to leverage existing tenant and developer relationships to expand their opportunity sets.

From a credit perspective, KBRA has a favorable view of current net lease REIT development pipelines. Programs remain manageable at approximately 3% of enterprise value (EV), generally emphasize fully pre-leased build-to-suit (BTS) projects, and benefit from substantial liquidity. Net lease REITs had nearly $15 billion of available capital sources as of June 30, 2026, providing almost 5x coverage of combined development pipelines. While construction funding requirements and the potential for projects to deliver into a higher interest rate or cap rate environment remain important risks, we believe the sector’s ample liquidity, relatively short development timelines, and focus on long-term leased, modern properties support the sector’s overall credit quality.

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