Why Companies Are Turning to Sale Leasebacks Amid Economic Uncertainty

In today’s volatile economic landscape, businesses face a barrage of external pressures, from tariff disputes and fluctuating interest rates to recession fears and geopolitical tensions. For owner-users and private equity firms managing diverse investments, these macroeconomic challenges can complicate strategic decision-making. Yet, amidst this uncertainty, forward-thinking companies are leveraging sale leasebacks to unlock capital, strengthen their financial position, and focus on growth-oriented priorities.

Why Focus on What You Can Control?

While economic uncertainty poses tangible risks, businesses that fixate on external factors may overlook internal strategies capable of delivering sustainable value. Rather than awaiting more favorable conditions, companies are taking decisive action to enhance liquidity and fortify their balance sheets. By prioritizing controllable initiatives, they can better position themselves to weather market volatility and achieve long-term goals.

The Power of the Sale Leaseback Strategy

A sale leaseback enables businesses to transform illiquid real estate assets into working capital while retaining operational control. By selling a property and leasing it back under a long-term agreement, companies can achieve multiple objectives:

• Reinvest in Growth: Capital unlocked from real estate can fund expansion, technology investments, or strategic acquisitions.
• Reduce Debt: Proceeds from a sale leaseback can be used to pay down debt, improving cash flow and financial resilience.
• Enhance Capital Efficiency: Real estate often yields lower returns than core business activities, so monetizing these assets allows firms to redirect funds to higher-return opportunities.

For example, MiddleGround Capital, a private equity firm, partnered with Ascension Advisory to execute a three-property sale leaseback for L.S. Starrett Company following its take-private acquisition. By unlocking capital from Starrett’s mission-critical facilities in Minnesota and Ohio, MiddleGround reinvested the proceeds into the company’s operations, fueling growth in its precision manufacturing business, while securing long-term leases to ensure operational continuity.

You can read more about this and other examples here: 3-Property Industrial Sale Leaseback for L.S. Starrett Company

The Numbers Behind Sale Leasebacks

The growing adoption of sale leasebacks underscores their value in uncertain times. In 2023, U.S. sale leaseback transaction volume exceeded $24 billion, with owner-occupied industrial and retail properties driving much of the activity. According to a Deloitte survey, 64% of CFOs are pursuing liquidity-enhancing strategies, with sale leasebacks emerging as a preferred option. Additionally, Ascension Advisory Private Equity Sale Leaseback Report indicates that 50% of respondents executed one or more sale leaseback transactions in 2024, with 20% completing three or more deals, a strong sign of growing confidence when using this financial strategy.

Ideal Candidates for a Sale Leaseback

Sale leasebacks are particularly well-suited for specific business profiles:

• Owner-occupied businesses aiming to unlock capital from non-core real estate assets.
• Private equity portfolio companies under pressure to optimize returns and improve leverage ratios, often using sale leasebacks to align financing with investment timelines and deliver value to stakeholders.
• Companies with mission-critical facilities where maintaining long-term operational control is non-negotiable.

Taking the Next Step

As economic uncertainty persists, proactive companies are turning to sale leasebacks to enhance liquidity, strengthen their financial foundation, and prioritize core business investments. By focusing on strategic tools like sale leasebacks, businesses can navigate market challenges with confidence and position themselves for sustained success. For owner-users and private equity firms alike, now is an opportune moment to evaluate your real estate portfolio and determine if a sale leaseback can unlock significant value for your organization.

Ascension Advisory also offers a unique way to deepen your understanding of the sale leaseback, via a free sale leaseback course, which can be accessed here: Ascension Learning.