Triple net leases are particularly effective as an inflation hedge due to their built-in rental escalators, which can be fixed or tied to inflation indices like the Consumer Price Index (CPI). These escalators ensure that rental income increases over time, helping landlords maintain their purchasing power even as costs rise.
Unlike fixed-income investments such as bonds, where coupon payments remain static and can be eroded by inflation, net lease investments are structured to grow cash flow over time. This makes triple net leases a superior choice for investors seeking to protect their income from inflationary pressures.
Furthermore, exposure to the underlying real estate provides additional protection, as property values may appreciate over time, further enhancing the investment's inflation-hedging capabilities. At lease expiration, landlords also have the opportunity to re-lease the property at current market rates, potentially capturing further upside.
In summary, the combination of contractual rent escalators and real estate appreciation makes triple net leases a natural and effective hedge against persistent inflation, offering investors both income growth and capital preservation.