Investor Resources

Investors focused on long-term growth in commercial real estate often ask the same question: which property type delivers better results—single-tenant or multi-tenant? Understanding how each model contributes to commercial real estate long-term growth can help investors make smarter, more aligned decisions.

In this blog, we’ll explore how single-tenant and multi-tenant properties create value, how they compare in terms of appreciation and risk, and how to align your real estate investment strategy with your long-term goals.

What Does “Building Value” Mean in Commercial Real Estate?

Before choosing a property type, it’s important to understand what “value” means in commercial real estate. Value creation typically comes from two areas: appreciation and cash flow.

Appreciation refers to the increase in a property’s value over time. This can result from rising market rents, improving location desirability, property renovations, or other market-driven forces.

Cash flow, on the other hand, is the income the property generates after operating expenses. It's a key driver of Net Operating Income (NOI), which (along with capitalization (cap) rates) is used to determine property value.

Long-term investors often focus on:

• Growing NOI over time

• Improving property efficiency

• Reducing vacancy

• Repositioning assets to achieve a lower cap rate and higher valuation

These strategies can look different depending on whether you invest in single-tenant or multi-tenant properties.

How Single-Tenant Properties Create Value

Single-tenant properties offer a more stable income profile, which can be attractive to certain investors. Let’s look at how they build long-term value.

Long-Term Leases and Predictable Returns

Single-tenant properties often feature long leases (sometimes 10 years or more), which can provide predictable, steady income. These lease structures often appeal to institutional buyers who prioritize consistency over volatility.

For long-term investors, this means:

• Passive wealth accumulation over time

• Lower vacancy risk

• Fewer operational surprises

Because the lease terms are often “triple-net” (NNN), the tenant is responsible for most operating expenses, which further simplifies ownership.

Tenant Credit and Lease Terms Drive Value

The strength of the tenant plays a critical role in valuation. National or regional brands with strong credit can significantly boost resale potential. A Walgreens or FedEx on a long-term lease will typically attract more buyer interest than a local tenant with limited credit history.

However, the downside is that income growth may be limited. Fixed lease terms can prevent rent increases from keeping pace with inflation, capping long-term appreciation.

Exit Strategies

When it’s time to sell, single-tenant properties with strong leases often appeal to REITs, family offices, or other passive investors looking for reliable cash flow.

That said, because of the passive nature of these assets, there are fewer opportunities to improve value through operations. The appreciation potential is largely dependent on the strength of the lease and the tenant’s creditworthiness.

How Multi-Tenant Properties Create Value

Multi-tenant assets (such as retail centers, medical buildings, or multi-tenant office parks) follow a different model that relies on active management and leasing strategies to grow value.

NOI Growth Through Leasing Activity

With multiple tenants, there are more opportunities to:

• Adjust rents as leases expire

• Improve tenant mix to attract more foot traffic

• Optimize lease terms for better profitability

In strong markets, rent growth and reduced vacancy can lead to significant NOI increases, which directly boost property value.

Value-Add and Repositioning Potential

Multi-tenant properties are commonly used in value-add investment strategies. Investors can make targeted improvements—such as renovating common areas, upgrading signage, or improving parking—and then raise rents or attract better tenants.

Improving operations often leads to cap rate compression, which means the same NOI yields a higher market value. This repositioning strategy can be especially effective in retail and office properties located in growing submarkets.

More Active Strategy, Greater Upside

Because of the multiple leases, tenant relationships, and property needs, multi-tenant investments require more hands-on involvement. However, they also offer greater upside over time.

For investors working with experienced property management partners, this model can be a powerful way to generate equity growth while benefiting from professional support.

Comparing Long-Term Growth: Which Strategy Fits Your Goals?

Both property types can contribute to the long-term growth of commercial real estate, but in different ways.

• Single-tenant properties provide stability, a lower management burden, and predictable returns. However, they often have a lower ceiling for appreciation.

• Multi-tenant properties offer greater flexibility and upside but require more involvement and risk tolerance.

The right approach depends on your investment goals.

Ask yourself:

• Do you want a low-maintenance, passive income stream?

• Or are you willing to take on more active management in exchange for higher potential gains?

• Are you investing for retirement income, or focused on aggressive portfolio growth?

Understanding your timeline and involvement level will help you make the right choice.

Choose a Partner That Supports Your Growth

Your investment strategy should support your long-term vision, not work against it. Whether you prefer the simplicity of a single-tenant property or the higher earning potential of a multi-tenant asset, alignment is key.

Kenwood Management specializes in both asset types and has helped countless investors build portfolios that match their unique goals. Our portfolio in the Baltimore and D.C. metro areas is designed for long-term success—with an emphasis on stable cash flow, value creation, and strong tenant relationships.

Want a clearer path to long-term growth? Take our Property Strategy Quiz and get a personalized investment snapshot today.