Retail NNN Cap Rates Hit Five-Year Low


Cap rates for the single-tenant net leased market continued to remain near historic lows in the fourth quarter of 2012. Most notably, cap rates for net leased retail properties declined by 25 basis points and are experiencing a premium in excess of 75 basis points over both office and industrial net lease properties.

Supply issues remain to be at the forefront of the net lease market as new construction is limited and there is a lack of existing supply of long-term net leased properties. In the fourth quarter there was a 12.5 percent decline in supply of retail net lease assets. One of the primary factors contributing to the lack of supply and new construction is that tenants are able to achieve low rents by backfilling second generation retail space. Furthermore, the current interest rate environment has enabled property owners to refinance and hold properties at historically low rates rather than sell.


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