Retail and Industrial Cap Rates Reach Historic Lows

LA Fitness is just the type of well-known brand that private buyers are familiar with, and that makes it a comfortable asset to purchase.

CHICAGO—The national net lease market continues to be intensely competitive and entice a record number of investors. Cap rates in the first quarter of 2016 for the single tenant net lease retail and industrial sectors reached a new historic low rate of 6.18% and 7.10% respectively, according to a report just published by the Boulder Group, a net lease firm located in suburban Chicago. But cap rates for the office sector did increase by 20 bps to a cap rate of 7.20%.

Private and 1031 buyers continue to prefer retail assets and that preference pushes the sector’s cap rates below that of net lease office and industrial properties. “Private and 1031 buyers are more familiar with retail tenants, prefer the lower price points and understand the general business practices of these tenants when compared to industrial or office tenants,” according to the report.