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Single-Tenant Net Lease Cap Rates Hit New Lows
Cap rates in the single-tenant net lease retail, office and industrial sectors reached new all-time lows in the third quarter, the Boulder Group reported. When compared to Q2, cap rates compressed by 19, 10 and 11 basis points, respectively, for retail, office and industrial.
“Cap rate compression in the third quarter of 2020 can be primarily attributed to the recent announcement by the Federal Reserve which suggested interest rates will remain near zero at least through 2023,” said Boulder Group president Randy Blankstein. “Combining this with a recent ‘flight to quality,’ there has been significant cap rate compression for strong credit and essential net leased assets.”
As COVID-19 continues to impact the real estate market, net lease investors are limiting the scope of what they’ll consider purchasing. Sellers of retail assets that experienced the greatest negative impact included movie theaters, gyms and second-tier casual dining.
“Owners of less desired net lease assets are holding back from the market as they are uninterested in selling at unfavorable pricing,” said Jimmy Goodman, partner, The Boulder Group.
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