Net Lease Cap Rates Widen for the Third Consecutive Quarter
Cap rates in the single-tenant net lease sector increased for the third consecutive quarter within all three sectors in the fourth quarter of 2022, according to The Boulder Group’s 4th Quarter Net Lease Research Report. Single-tenant cap rates increased to 5.95% (up nine basis points) for retail, 6.95% (up 15 bps) for office and 6.65% (up four bps) for industrial.
“Continued upward pressure mounts on cap rates for net leased properties” said Randy Blankstein, president, The Boulder Group. “Borrowing costs for both private and institutional investors continued to rise over the course of 2022. For reference, the 10-year Treasury yield ended 2022 at 3.87% after beginning the year at 1.53%.”
Following historically low cap rate levels for all three assets classes in Q1 2022, the retail and office sectors experienced a significant rise throughout 2022. Single-tenant retail cap rates rose by 20 bps, while office cap rates expanded by 25 bps. Industrial cap rates widened to a lesser extent over the course of 2022, rising just five bps.
“The primary reason for increasing cap rates is related to borrowing costs which impacted pricing in all real estate sectors,” added Jimmy Goodman, partner, The Boulder Group.
- ◦Sale/Acquisition