How Delayed Interest Rate Cuts Make Sale leasebacks More Attractive

The Federal Reserve's “higher-for-longer” stance is reshaping capital markets and sale leasebacks (SLBs) are emerging as one of the few tools that make sense in this uncertain environment.

In early May, Goldman Sachs revised its forecast, pushing back expectations for the first Fed rate cut to September 2024, citing persistent inflation pressures and a still-resilient labor market. The delay has extended financial uncertainty for both operators and capital provider, rekindling concern about a stagflation-lite backdrop: slower growth, elevated rates, and sticky inflation.

Why This Market Shift Matters

In a stagflation-prone environment:

• Capital becomes more expensive.
• Traditional debt becomes less appealing (or even unavailable).
• Investors demand real assets with yield and downside protection.

That’s exactly where SLBs shine giving companies liquidity without new debt, and giving investors access to stable, rent-backed income.

Sellers Are Facing a New Liquidity Crunch

Whether you're a manufacturer, logistics operator, healthcare provider, or industrial group, the story is the same: Debt is expensive. Private equity is selective. IPOs are frozen.

But growth still needs funding.

That’s why companies are increasingly using SLBs to monetize owned real estate while maintaining full operational control. Unlike a traditional loan, a sale leaseback converts a fixed asset into cash without taking on new debt or diluting equity.

Why companies are choosing SLBs in today’s market:

• Unlock capital from owned real estate - ideal when capital markets are constrained.
• Reinvest into operations, technology, or expansion-instead of sitting on underutilized balance sheet assets.
• Maintain operational continuity-by staying in the property as a long-term tenant.
• Finance build-to-suit projects-by selling the facility to an investor upon delivery and leasing it back.

Investors Are Sitting on Dry Powder and Need Yield

Meanwhile, the investment case for SLBs has never been stronger. With rate cuts delayed and cap rates widening, investors are prioritizing stable, income-producing assets that offer long-term downside protection.

SLBs deliver on that front with credit tenants, long lease terms, and built-in rent escalations that hedge against inflation.

Why SLBs are compelling for investors in a high-rate environment:

• Higher cap rates than typical core real estate assets.
• Bond-like stability from long-term leases with operating companies.
• Inflation-aligned returns through structured escalators.
• Attractive yield spreads versus public market alternatives and corporate bonds.

SLBs aren’t just a niche tool anymore-they’re a strategic allocation for family offices, institutions, REITs, and cross-border capital.

A Timely Shift in Mindset

Companies that once hesitated to sell their real estate are now proactively exploring SLBs to free up liquidity. And investors who previously focused on short-duration assets are locking in long-term, rent-backed income streams.

Delayed interest rate cuts have created a “capital tension” that SLBs uniquely solve: They give sellers liquidity without leverage and give investors income without volatility.

Bottom Line

Until the Fed pivots, capital will remain selective-and expensive. That’s why sale leasebacks are no longer just a defensive move. They’re a strategic advantage for any business or investor

adapting to a slower, higher-rate world. If you are interested in learning if a SLB may be the right solution for you, reach out to our team for a complimentary consultation.