Single-tenant net lease sales declined in the third quarter, Northmarq reported. With that decline came another increase in cap rates, according to The Boulder Group. 

The single-tenant office market reported $1.78 billion in investment sales volume during Q3 2023, a 31% decline from Q2, reported Lanie Beck, senior director, content & marketing research at Northmarq. Meanwhile, at $4.5 billion for the quarter, volume for single-tenant industrial is down 23.5% from last quarter and more than 51% year over year. 

A bright spot in the net lease investment sales sector is single-tenant retail. Investment sales volume for single-tenant retail properties increased 51.4% in Q3 and has been on par with historical averages throughout the year, Beck wrote. 

The Boulder Group reported that cap rates for single-tenant net lease properties increased for the sixth consecutive quarter to 6.51%, an 11-basis-point increase compared to Q2. By sector, cap rates increased to 6.27% (+10 bps) for retail, 7.41% (+14 bps) for office and 6.96% (+16 bps) for industrial during the quarter. 

“The consistent rise in interest rates continues to be the primary driver for the upward pressure on cap rates” says Randy Blankstein, president, The Boulder Group. “Over the course of the third quarter, the 10-year Treasury peaked at 4.68%, which is almost 100 bps higher than the lowest level of 3.73% during the same time period.”