Retail Caps Sink to New Historic Low

CHICAGO—Cap rates for the single tenant net lease retail market have sunk even below the historic lows they hit during 2013, according to a new study on the first quarter of 2014 by the Boulder Group, a commercial real estate firm in suburban Chicago. The cap rates for retail properties went down to 6.75%, a decline of 10 bps from the last quarter, when rates had hit the historic low of 6.85%. One year ago the retail rate stood at 7.0%.

“The main challenge facing investors is the limited pipeline of properties with long term leases to investment grade tenants in primary markets,” according to Boulder researchers. “After vigorous fund raising years and accommodating capital markets, investors are struggling to acquire assets that fit acquisition criteria while meeting return thresholds.”