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.”