Single-Tenant Net Lease Rates Headed Up in 2017

Retail properties have been especially popular among net lease investors, but after several years, cap rates are increasing.

CHICAGO—Cap rates in the fourth quarter of 2016 for the single tenant net lease sector increased or remained the same for all three asset classes, according to an end of the year report from the Boulder Group, a net lease firm in suburban Chicago. It’s a sign that these rates have finally hit bottom after a historic slide that has lasted several years and will finally move up significantly in 2017.

“That’s the likely path forward,” Randy Blankstein, president of Boulder, tells GlobeSt.com. The main contributor to the recent rate increases, and the boosts expected over the next year, is that interest rates have finally started to rise. During the fourth quarter, the 10 Year Treasury yield increased significantly to 2.45; up from 1.62 at the start of the quarter, and net lease participants have carefully monitored the effect of these rising rates on net lease valuations.