The Boulder Group Releases Net Leased Report


boulder group logoCap rates in the third quarter of 2017 in the single tenant net lease sector decreased across all asset classes when compared to the previous quarter. Cap rates for retail properties decreased by 12 basis points to 6.11%. This represented the lowest level in the net lease retail sector since the third quarter of 2016 when cap rates were at a historical low of 6.10%. Cap rates for net lease office and industrial properties decreased by 16 and 10 basis points to 6.98% and 7.27% respectively.

After two consecutive quarters of increasing cap rates, cap rates decreased across all three sectors. Throughout the course of the third quarter, the 10-year treasury yield reached its lowest level of the year (2.06) before ending the quarter at 2.33. Competition for retail assets increased in the third quarter as evidenced by the spread between asking and closed cap rates. In the third quarter of 2017, this spread decreased by 14 basis points to 21 basis points. While cap rates compressed among all of the net lease sectors, premium pricing for single tenant properties is concentrated in top tier assets with long term leases, credit tenants and core markets. Some investors seeking yield in a compressed cap rate environment have turned to shorter term leases or tenants with credit concerns if the underlying real estate fundamentals warrant the risk.


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