Auto Parts: The Essential Retail Category
Auto parts retail is one of the most recession-resistant sectors in commercial real estate. When economies contract, people defer new car purchases and maintain their existing vehicles longer — driving increased auto parts demand. In 2008-2009 and during COVID-19, auto parts stores saw sales increase while most other retail categories declined sharply.
This counter-cyclical characteristic makes AutoZone and O'Reilly NNN properties particularly valuable for investors seeking true downside protection in their NNN portfolios.
AutoZone: Scale and Stability
Company Overview
AutoZone (NYSE: AZO) is the nation's largest auto parts retailer with 6,900+ US stores and locations in Mexico and Brazil. Headquartered in Memphis, Tennessee, AutoZone has delivered 20+ consecutive years of same-store sales growth — one of the longest streaks in US retail.
Credit Profile
S&P BBB (investment-grade). AutoZone's credit is supported by consistent profitability, strong cash flow generation, and a remarkably efficient supply chain and store operations model. Their DIY (do-it-yourself) and DIFM (do-it-for-me/commercial) segments both perform well across economic cycles.
NNN Lease Structure
AutoZone signs 15-year absolute NNN leases with four 5-year options. Rent escalations vary by property but typically include 5–10% increases every 5 years. AutoZone is absolute NNN — zero landlord responsibilities.
Cap Rates
AutoZone NNN: 5.5–6.75% in primary/secondary markets, 6.5–7.5% in tertiary markets. The Memphis headquarters presence means particularly strong AutoZone NNN deal flow through The ESS Group relationships.
O'Reilly Auto Parts: Premium Credit at a Higher Cost
Company Overview
O'Reilly Automotive (NASDAQ: ORLY) has 6,200+ US locations and has been one of the best-performing retail stocks over the past 15 years. Their dual-market strategy (DIY and professional installer commercial accounts) has driven consistent revenue growth.
Credit Profile
S&P BBB+ (investment-grade, one notch above AutoZone). O'Reilly's slightly stronger credit rating reflects their consistent financial performance and conservative balance sheet management.
NNN Lease Structure
O'Reilly signs 15-year absolute NNN leases with multiple 5-year options. Escalation structure is similar to AutoZone — 5–10% every 5 years.
Cap Rates
O'Reilly NNN: 5.25–6.5% — typically 25–50 basis points tighter than AutoZone, reflecting their slightly stronger credit profile and the premium demand from investors who are aware of their outstanding financial track record.
Side-by-Side Comparison
Stores: AutoZone 6,900+ | O'Reilly 6,200+
S&P Credit: AutoZone BBB | O'Reilly BBB+
Cap Rate Range: AutoZone 5.5–6.75% | O'Reilly 5.25–6.5%
Lease Term: Both 15 years initial
Store Count Growth: Both expanding ~200 stores per year domestically
Same-Store Sales Growth: Both positive for 20+ consecutive years
Advance Auto Parts: The Third Option
Advance Auto Parts (NYSE: AAP) is a distant third in credit quality following significant business challenges in 2022–2024 (management turnover, store closures, margin compression). Advance cap rates have risen to 7.0–8.5% to reflect the higher credit risk. Value-focused investors willing to do careful site analysis may find opportunity here, but conservative investors should favor AutoZone or O'Reilly.
Investment Recommendation
For maximum credit safety: O'Reilly. For maximum yield with acceptable credit: AutoZone. Both are excellent NNN tenant choices for a well-diversified portfolio.
The ESS Group maintains relationships with both AutoZone and O'Reilly franchisees and can access off-market opportunities in both tenant categories. Contact us to discuss current auto parts NNN inventory.
Ready to Invest?
Our advisors specialize in sourcing premium off-market NNN properties for high-net-worth investors and 1031 exchanges. Contact The ESS Group to see available inventory.