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.”
Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces.
Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications.
Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).
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