Net Lease Cap Rates Headed Up

Cap rates for the single tenant net lease retail sector remained unchanged at their historic low rate of 6.18%.

CHICAGO—Cap rates for net lease properties have been trending downward for more than five years, and recently sank to historic lows. But that long-term decline may be at an end. In the first quarter of 2016 cap rates for the single tenant net lease retail sector remained unchanged at their historic low rate of 6.18%, according to a report just issued by the Boulder Group, a net lease firm in suburban Chicago. However, during the same timeframe, cap rates for the office and industrial sectors increased 5 bps and 16 bps, respectively, to 7.25% and 7.26%.

“Cap rates will likely not go much lower unless interest rates fall further,” Randy Blankstein, president of Boulder, tells GlobeSt.com. He attributes the retail sector’s steadiness to strong demand from 1031 and private buyers. And the volatility of the capital markets was a contributing factor to the cap rate increases for the office and industrial properties.