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Net Lease Cap Rates Tick Upward as Lower-Quality Properties Come to Market
Cap rates in the single-tenant net lease sector rose slightly in the second quarter after hitting historic lows in Q1, The Boulder Group reported. Single tenant retail cap rates increased by 11 basis points to 6.02% while industrial increased by 18 bps to 6.89%, while office remained unchanged.
“Following a quarter of historic pricing for the net lease sector, owners of lower quality assets brought properties to the market in attempt to take advantage of current cap rate levels,” said Randy Blankstein, president, The Boulder Group. “The increased concentration of lower quality assets was the primary contributing factor for the rise in cap rates.”
Despite a decrease of approximately 3% in supply of net lease assets, lower quality assets (short term leases and less desirable tenant credits) made up a larger concentration of the market in Q2. “The supply of assets with long-term leases to credit tenants remains limited,” added partner Jimmy Goodman. “Only 22% of the property supply had more than 15 years of lease term remaining.”
- ◦Sale/Acquisition
