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Single-Tenant Retail, Industrial Cap Rates Reach Historic Lows

Cap rates in the single-tenant net lease sector reached historic lows for the retail and industrial sectors for retail and industrial properties, the Boulder Group reported in its 1st Quarter Net Lease Research Report. Single tenant retail cap rates compressed by nine basis points to 5.91%, while industrial compressed by four bps to 6.71%. Office cap rates increased by five bps to 6.95% 

“Cap rate compression for retail and industrial assets can be best attributed to investor demand for secure cash flow streams,” said Randy Blankstein, president, The Boulder Group. “Office cap rates increased due to general concerns regarding office utilization following the pandemic.”

Despite a 9% percent increase in property supply during Q1, there remains a lack of high-quality assets with long-term leases. Accordingly, owners of lower- quality assets brought properties to the market, seeking to take advantage of the compressed cap rate environment. 

“The limited supply of high-quality assets created increased competition amongst investors,” said partner Jimmy Goodman. “This competition has created significant pressure on cap rates despite the recent uptick in the 10-year Treasury yield.”

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About Paul Bubny

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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