Warehouses and distribution centers are critical components of any supply chain. They can also be a critical source of capital.
The 10-year Treasury is near 5%, its highest level since 2007, and capital is expensive across the board. That makes this a good moment to revisit a lesser-known corporate finance tool that should be in every CFO’s toolkit: the sale leaseback. For companies with owned warehouse and logistics centers, a substantial source of capital may reside in the real estate their business rests upon.
In a sale leaseback transaction, an operating business with owned properties sells its real estate and simultaneously leases it back. The sale of the property unlocks capital and can create a more efficient capital structure.
The sale leaseback market remains active, recording 178 transactions in the second quarter of 2026, the highest second-quarter count since 2022, while dollar volume rose approximately 27% from the first quarter to $4.6 billion. Industrial properties accounted for 42% of transactions by count, indicating warehouse owners have a receptive market for their real estate.
In July 2026, PetMed Express (PetMeds) announced a proposed $37 million sale leaseback of its distribution center in Delray Beach, Florida, along with its headquarters. Interim CEO and President Leslie Campbell said in a press release, “This transaction enables us to continue to occupy the headquarters that has been home to PetMeds for the past decade, while providing us with additional financial flexibility.”
In December 2025, Scholastic completed a sale leaseback of its primary distribution facility in Jefferson City, Missouri, to funds managed by affiliates of Fortress Investment Group. The transaction generated $95 million in gross proceeds. Scholastic signed a 20-year lease with two 10-year extension options, allowing the company to continue operating from the facility.
Another example came in February 2025, when REI Co-op completed a $230 million sale leaseback covering four distribution centers in Washington, Pennsylvania, Arizona and Tennessee. The properties totaled more than 1.9 million square feet. REI continued operating the facilities and retained ownership of the machinery and equipment inside them.
All three transactions allowed the companies to unlock capital from their distribution real estate while maintaining the facilities they needed to support ongoing operations.
How Sale Leasebacks Work
Warehouse owners often hesitate to sell a facility that is critical to their network. Much of that risk can be addressed in the lease. Initial lease terms commonly run from 15 to 20 years, and often include renewal options that can extend occupancy for decades. From an operating standpoint, the company remains in the facility, and continues to run it as before.
Warehouse owners have several points to negotiate before the transaction closes. The lease establishes the initial rent, future rent increases, renewal options and responsibility for maintenance, taxes and insurance. It also addresses property alterations, environmental matters and financial reporting requirements, along with many other areas. These terms determine how much flexibility the company will retain after the property is sold.
Change-of-control provisions also deserve attention, especially if the operator may sell the business, consolidate its network or relocate in the future. These issues are easier to address before the transaction closes, when the owner can negotiate them as part of the overall transaction.
The operator’s financial strength, including the quality and stability of its cash flows, will influence the terms available. Sale leaseback investors focus heavily on the tenant’s ability to meet its rent obligations over the life of the lease. Stable cash flow and a healthy balance sheet can help an operator attract more buyers and stronger pricing, even when the warehouse is located in a smaller or tertiary market.
Why Consider a Sale Leaseback?
A sale leaseback is best suited to a warehouse owner that expects to remain in the facility for many years and has a defined use for the proceeds. The process should begin with a sale leaseback valuation, which includes an estimate of the likely rent and a comparison with conventional financing.
A sale leaseback typically unlocks more capital than a conventional mortgage. A conventional mortgage can provide access to capital while allowing the operator to retain ownership, but it typically covers only a portion of the property’s value. A sale leaseback allows the operator to access the highest achievable proceeds. For example, a warehouse valued at $10 million might support $7 million to $8 million in mortgage financing, depending on the lender and market conditions. A sale leaseback could generate the full $10 million before transaction costs and taxes.
That capital-efficiency argument is only part of the story. A sale leaseback also shifts real estate risk off the operator’s balance sheet. Executing a sale leaseback and conveying an industrial property to an institutional real estate investor transfers the risks of real estate ownership, including re-tenanting risk and obsolescence risk, while unlocking capital that can be used to drive growth.
Owning the building a business operates in is a capital allocation decision, not a given. Every dollar tied up in warehouse real estate is a dollar not funding automation, inventory, acquisitions or debt reduction. A sale leaseback lets an operator redirect that capital without giving up the facility. With today’s elevated borrowing costs, warehouse and logistics operators have good reason to ask whether their real estate is earning its place on the balance sheet.
Dave Rosenberg, CFA is a Partner at SLB Capital Advisors.
