Why NNN Investors Prefer Vermont State: Higher Growth & Competitive Cap Rates Explained
Future holding for NNN property investments in Vermont
Triple Net Lease (NNN) properties, where tenants cover property taxes, insurance, and maintenance, offer investors steady income with minimal management. In Vermont, the outlook for NNN investment remains compelling, rooted in local commercial trends, demographic shifts, and market dynamics.
1. Economic and Population Growth
Vermont’s population trends are mixed. While the 2020 census recorded about 643,085 residents. The state experienced a brief pandemic-era influx of approximately 4,500 domestic migrants between 2020 and 2021. However, by mid-2024, Vermont began losing more residents than it gained due to limited housing availability, high costs, and an aging demographic.
That said, pockets of growth persist, particularly in Chittenden County and its suburbs like Williston, which has seen steady population gains and emerged as a key retail and commuter hub
2. Stability and Demand for NNN Properties
Nationwide, NNN properties continue to attract investors seeking predictable long-term income, especially in uncertain markets. In Vermont, the commercial real estate sector shows growing interest in:
Industrial/warehouse space, buoyed by e-commerce demand.
Coworking and flexible office spaces, catering to freelancers and remote workers.
Mixed-use and adaptive reuse of retail spaces in response to evolving consumer behavior.
These trends suggest solid prospects for NNN leases in industrial, office, and flexible retail formats.
3. Market Trends and Cap Rates
Detailed statewide Vermont cap rates for NNN properties are scarce, but listings showcase attractive opportunities:
Retail buildings ranging from ~14,500 sq ft at a 6.25% cap rate to ~33,000 sq ft at 9.20%.
Multiple NNN properties are listed through NNN-Properties.com, including Walgreens (e.g., ~6.5–7.9% cap rates), restaurants, and other freestanding buildings.
These rates compare favorably with national benchmarks: retail properties typically yield 5–7%, suburban offices 6.5–8%, and industrial assets 2.5–6%. Vermont listings often exceed those ranges, suggesting strong upside for investors.
4. Financing Considerations for NNN Investors
While Vermont-specific financing thresholds for NNN investments weren’t found, similar standards likely apply: high net worth (~$1M+) or sufficient income, with typical down payments of 30–40%. Leveraged financing is commonly used, and 1031 exchanges remain a strategic tool for investors seeking tax deferral on replacement properties.
5. Local Market Opportunities
Available NNN Listing Highlights:
Retail building (~14.5k sf) at 6.25% cap rate
Retail building (~33k sf) at 9.20% cap rate
Additional NNN listings (e.g. Walgreens, restaurants) with cap rates between 6.5–7.9%.
Emerging High-Potential Areas:
Based on broader investment trends in Vermont:
Burlington metro and suburbs (e.g., South Burlington, Essex Junction, Williston): strong rental and commercial demand, driven by education, healthcare, and urban amenities.
Resort towns (Stowe, Killington region): lucrative for hospitality and mixed-use NNN setups. Though cap rates may be modest (e.g., 3–4.5%), year-round tourism supports sustained leasing activity.
Central and Southern Vermont (Montpelier, Brattleboro, Bennington): steady government and commuter demand bolsters rental stability; cap rates in the 5–7% range may apply.
Northeast Kingdom and emerging towns (e.g., Rutland, remote-work friendly areas): more affordable entry points, with cap rates up to 6–8%; remote workflow trends and infrastructure upgrades make these attractive.
- Notably, Rutland is gaining momentum: projected property value appreciation of 15–20% by 2026, with rental yields of 8–12% and strong value-add potential.
Investors and brokers are increasingly considering Vermont for net lease (NNN) properties thanks to favorable cap rates, strategic regional opportunities, and a supportive investment landscape. Here’s how Vermont compares:
1. Attractive Cap Rates Relative to Other Markets
NNN lease properties in Vermont, especially those with national or strong credit tenants, are drawing attention for their solid cap rates:
Walgreens (Bakersfield, VT): Cap rates up to 7.9% and 7.3% on recently reduced listings.
Popeye’s (Burlington, VT): Around 7.48% cap rate.
Rite Aid (West Windsor, VT): Listed at 7.25%.
Retail buildings via LoopNet: Listings at 6.25% (≈14,500 sq ft) and 9.20% (≈33,000 sq ft).
These rates are significantly higher than national norms, where, for example, suburban offices typically yield 6.5–8.0%, and retail properties 5.0–7.0%
2. Lower Acquisition Costs
While specific pricing per se wasn’t found, Vermont’s generally smaller and less competitive market (outside key metros) may offer cost advantages compared to high-demand states. The ability to acquire freestanding properties with strong tenants and favorable cap rates enhances affordability and return potential.
3. Economic and Demographic Factors
Vermont’s commercial growth is modest but focused:
Key opportunity zones include Burlington metro, Essex Junction, and South Burlington, areas benefiting from educational institutions, tech, healthcare, and a stable local economy.
Rural and leisure destinations, such as Northeast Kingdom, Stowe, Killington/Rutland, and Brattleboro, offer strong tourism, outdoor recreation, and second-home markets, leading to steady rental demand and attractive cap rates (6–8%)
4. Strong Tenant Demand in Essential and Credit-Grade Segments
Listings in Vermont feature national tenants like Walgreens, Popeye’s, and Rite Aid, these established, creditworthy tenants provide the kind of long-term income stability attractive to NNN investors.
5. Tax Environment and LLC Income Treatment
Vermont investors should note:
The rental income generated by NNN investments is subject to Vermont state income tax, which ranges from 3.35% to 6.6% depending on income level.
LLCs taxed as pass-through entities (S-corps or partnerships) must pay a minimum Business Entity Tax (BET) of $250 annually.
Vermont does not exempt passive LLC rental income from tax, pass-through income is taxed at the owner’s personal rate, unlike states with no personal income tax.
6. Infrastructure, Tourism, and Sector Drivers
Vermont’s economy thrives on:
Tourism and second-home markets in ski and outdoor destinations.
Stable government and education sectors in central areas like Montpelier and Waterbury.
Tech, healthcare, and redevelopment in and around Burlington.
Affordable value-add regions like Northeast Kingdom are benefiting from remote-work trends and outdoor lifestyle appeal.
These factors support niche net lease demand in retail, hospitality, and localized service sectors.
Income Taxes
Vermont’s Tax Landscape for NNN Investors: What to Know
Vermont offers a clear, predictable tax framework for triple-net (NNN) investors. While not a “tax haven,” understanding the state’s rules helps you model true after-tax returns and choose the right entity structure for net-lease holdings.
1. State Taxation of LLC/Pass-Through Rental Income
If you own NNN property through an LLC taxed as a pass-through (single-member/partnership/S-corp), Vermont generally taxes the pass-through income at the owner’s personal rate. Most pass-throughs also owe a Business Entity Tax (BET) minimum of $250 per year, even in low-income years.
2. Corporate Income Tax (for C-corps)
C-corporations with Vermont-source income face graduated corporate rates of ~6.0% to 8.5% (post-2023 reforms adjusted the structure and apportionment). If you hold NNN assets in a C-corp, model these brackets alongside federal C-corp tax.
3. Personal Income Tax Rates (for Individual Owners)
Vermont uses a progressive structure. For the 2024/2025 filing seasons, top marginal rates run up to ~8.75%, with lower brackets beginning around 3.35%. These brackets apply to ordinary income, which includes rental income from pass-through entities.
4. Estate & Inheritance Taxes
Vermont levies a state estate tax: the portion of a taxable estate above $5,000,000 is taxed at a flat 16%. Vermont does not impose a separate inheritance tax. For investors building multi-property NNN portfolios, this is a key planning variable.
5. Property Taxes
The state’s average effective property tax rate is about ~1.78%, ranking among the higher rates nationally (county-level rates vary and can be near or above ~2% in some areas). Under NNN leases, tenants typically pay property taxes, but higher mill rates still influence tenant health, rent coverage, and site selection.
6. Capital Gains & 1031 Exchanges
Vermont does not have a separate capital gains tax, gains are generally taxed as ordinary income at Vermont’s personal rates. Like-kind exchanges under IRC 1031 are recognized for deferral at the federal level and widely used by Vermont investors to roll proceeds into replacement NNN assets; confirm any Vermont-specific withholding or filing steps with your QI/CPA.
Investing in triple net lease (NNN) properties in Vermont can be a smart, hands-off strategy in markets with steady demand drivers like health care, higher education, tourism, and border/transport logistics. Here are some of the top cities and counties in Vermont to consider, mirroring your requested format:
1. Chittenden County (Burlington–South Burlington–Essex/Williston):
Population Growth: From 2023 to 2024, the county grew from 170,092 to 170,851 (≈ +759).
Economic Development: Anchored by the University of Vermont Medical Center (the state’s largest employer) and GlobalFoundries’ Essex Junction fab, which is being modernized under federal CHIPS-related support.
Investment Potential: Dense, high-income trade areas along Williston Rd., Shelburne Rd., and Taft Corners support essential retail and QSR pads, classic single-tenant NNN opportunities.
2. Franklin County (St. Albans / I-89 Corridor):
Population Growth: From 2023 to 2024, 50,902 to 51,066 (≈ +164).
Economic Development: Bedroom-community growth tied to the Burlington MSA and cross-border commerce with Québec via I-89/Highgate Springs. (The population series from FRED confirms the county’s upward trend.).
Investment Potential: Neighborhood retail, dollar/auto parts, pharmacies, and QSRs near interstate exits and St. Albans’ retail nodes fit the NNN profile (long leases, essential goods).
3. Lamoille County (Stowe–Morrisville):
Population Growth: From 2023 to 2024, 26,233 to 26,248 (≈ +15).
Economic Development: Four-season tourism centered on Stowe Mountain Resort (Vail Resorts) drives year-round foot traffic and hospitality spend.
Investment Potential: Small-format, service-oriented single-tenant assets (coffee, fuel/C-store, urgent care, gear rentals) benefit from reliable visitor flows and affluent second-home owners.
4. Washington County (Montpelier–Barre):
Population Growth: From 2023 to 2024, 60,258 to 59,844 (≈ –414), a slight dip.
Economic Development: State-government employment and ongoing downtown flood-recovery work (post-July 2023) are catalyzing renovations and reinvestment in core corridors.
Investment Potential: Essential retail, pharmacies, and building-materials tenants near reconstruction and civic hubs offer durable NNN demand despite modest population softness.
5. Rutland County (Rutland–Killington):
Population Growth: From 2023 to 2024, 62,319 to 62,065 (≈ –254).
Economic Development: Healthcare is a pillar, Rutland Regional Medical Center is one of the region’s largest employers, and Killington Resort is advancing plans for a major slopeside village that aims to elevate year-round visitation.
Investment Potential: NNN pads serving healthcare commuters and tourism (fast casual, fuel/C-store, outdoor/auto parts) can capture stable sales even as the county’s population is flat to slightly down.
Pros:
1️⃣ Attractive Cap Rates
Net lease properties in Vermont often trade at 6%–9% cap rates (Walgreens, Rite Aid, Popeye’s, and local retail listings). These yields are stronger than the national average for similar credit tenants, offering solid cash flow potential.
2️⃣ Stable Tenant Base
Essential retail and credit tenants (Walgreens, Dollar General, Rite Aid, QSRs, and fuel/convenience stores) are well represented in Vermont, providing reliable, long-term rental income under NNN structures.
3️⃣ Tourism & Lifestyle Economy
Tourism is a major driver—resorts in Stowe, Killington, and the Northeast Kingdom bring year-round demand for retail, hospitality, and services. This consistent inflow of visitors supports NNN properties in leisure and service corridors.
4️⃣ Educational & Healthcare Anchors
Institutions like the University of Vermont and the UVM Medical Center in Burlington provide employment stability and steady demand for surrounding commercial properties, creating dependable tenant markets.
5️⃣ Growing Suburban & Commuter Markets
Areas around Chittenden County (Williston, Essex, South Burlington) and commuter hubs in Franklin County (St. Albans/I-89 corridor) are seeing population stability and growth, supporting neighborhood retail NNN opportunities.
6️⃣ 1031 Exchange Opportunities
Vermont NNN listings are attractive to investors completing 1031 exchanges, with multiple national-credit single-tenant properties available across retail and QSR sectors.
Cons:
1️⃣ Higher Property Tax Burden
Vermont has one of the higher average effective property tax rates (~1.78%) in the U.S. Although tenants pay taxes in NNN structures, elevated rates can influence tenant costs and site selection.
2️⃣ Population Growth is Modest
While Chittenden County is growing, several counties (e.g., Rutland, Washington) are flat or declining in population, limiting retail expansion and reducing tenant demand in some areas.
3️⃣ State Income & Estate Taxes
Vermont taxes rental income from LLCs and pass-throughs at personal rates (~3.35%–8.75%), with a $250 LLC business entity tax minimum. The state also imposes a 16% estate tax above $5M, which can affect long-term wealth transfer planning.
4️⃣ Limited Urban Density
Vermont lacks major metropolitan centers. Retail is clustered in small hubs like Burlington, Rutland, and Montpelier, so large-scale urban NNN projects are limited compared to more urbanized states.
5️⃣ Economic Dependence on Key Sectors
Tourism, healthcare, higher education, and a few industrial anchors (semiconductors, specialty manufacturing) drive much of Vermont’s economy. A downturn in any of these sectors could affect tenant performance and long-term lease stability.
Vermont NNN Properties for 1031 Exchange
Invest in Free Standing Single Tenant Triple Net (NNN) Properties in Vermont
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At Triple Net Investment Group, we specialize in the sale of single tenant NNN properties and triple net shopping centers across the United States. Our team is dedicated to helping investors find high-quality (Tenant Triple Net) NNN properties in Vermont and nationwide that align with their financial goals and 1031 exchange requirements.
With our in-depth market knowledge and personalized service, we provide tailored investment strategies for both buyers and sellers of commercial real estate. Whether you’re looking to defer capital gains through a 1031 tax-deferred exchange or want to diversify your portfolio with income-generating assets, our team offers a wide selection of vetted NNN investment properties.
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