3 Highly Defensive Net Lease REITs Built to Weather Volatility

Net lease REITs like O, ADC, and NNN fit the bill perfectly

Jun 23, 2025

Investment Thesis

My investment philosophy is rooted in financial independence and downside protection. I focus on real assets and income-producing investments—especially REITs—that offer stable cash flows, conservative balance sheets, and a track record of reliable dividends. In today’s volatile environment, net lease REITs Realty Income (O), Agree Realty (ADC), and NNN REIT (NNN)—among the largest U.S. net lease REITs—stand out as highly defensive options.

These REITs are engineered to deliver steady income, resilience against economic downturns, and consistent dividends. While each has a unique tenant mix, all are anchored by tenants providing everyday necessities and services. Despite current sector headwinds and a lackluster Q1, I believe investors should hold these names for stability and income.

Net Lease REITs Prioritize Stability

Net lease REITs are built for balance sheet strength and cash flow consistency.

Realty Income (O):
O is extremely diversified, with over 15,600 properties across 50 U.S. states and several European countries, leased to tenants in 91 different industries. About 91% of its retail rental income comes from non-discretionary, service-oriented tenants like dollar stores, grocery stores, pharmacies, and convenience stores. Top tenants include Walgreens, Dollar General, 7-Eleven, FedEx, and Life Time Fitness.
Agree Realty (ADC):
ADC specializes in necessity-based retail—dollar stores, pharmacies, home improvement, auto parts, and grocery stores. Its largest tenants by rent are Walmart, Dollar General, Tractor Supply, Best Buy, CVS, Walgreens, and Kroger. A significant portion of ADC’s tenants are investment-grade, meaning they are financially strong and less likely to default.
NNN REIT (NNN):
NNN owns more than 3,600 single-tenant retail properties across the U.S., focusing on service-oriented and necessity-based businesses. Its portfolio includes convenience stores, restaurants (limited and full service), automotive service centers, and fitness centers. Major brands include 7-Eleven, Mister Car Wash, LA Fitness, and Sunoco.

No Growth Acceleration—But That’s Not the Point

Overall, higher interest rates and cap rate compression are likely to moderate or maintain growth for net lease REITs this year. This matters because net lease REITs’ growth is predominantly acquisition-driven: their long lease structures provide stability but little organic upside. This is fundamentally different from sectors like multifamily or industrial, where shorter leases enable greater internal growth through rent hikes.

O’s 2025 investment target is consistent with its recent history and does not represent a major acceleration. The company is maintaining, not expanding, its external growth ambitions.
ADC reported accelerating investment activity in Q1 2025 and emphasized its readiness to capitalize on market opportunities, supported by strong liquidity and a robust balance sheet, despite acknowledging ongoing macroeconomic volatility.

· NNN is not accelerating its acquisition pace because it does not consider the environment prudent, but it still expects to match 2024 levels.

Well-Positioned for Long-Term Growth

While industry observers like Nareit remain optimistic about the sector’s long-term prospects, management teams are signaling caution for 2025. The sector remains active and well-positioned for the long run, but near-term growth should be expected to be steady, not surging. Net lease REITs are expected to maintain acquisition activity at 2024 levels and are more selective in underwriting and capital allocation.

Conclusion

If you already own O, ADC, or NNN, my take is to stay put. These REITs are ideal for investors seeking defensive, income-focused strategies, not for those chasing aggressive growth. The sector’s stability and yield are attractive, but expectations for rapid expansion should be tempered (maybe except for ADC) given the current economic and acquisition outlook.

This approach reflects my core beliefs: prioritize financial independence, focus on resilient income, and don’t depend on any single employer—or market cycle—for your security. Net lease REITs like O, ADC, and NNN fit that bill perfectly in 2025.

Disclaimer: This newsletter is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any security. All investments involve risk, including possible loss of principal. Please conduct your own research or consult a qualified financial advisor before making investment decisions.