Net Lease Cap Rates Hit New Historic Lows

CHICAGO—The historically low cap rates for all major net lease sectors remained unchanged or declined in the fourth quarter, according to a new report from the Boulder Group, a net lease firm in suburban Chicago. Single tenant retail properties remained at their historic low rate of 6.25% and rates for the office and industrial sector reached new historic lows of 7.00% and 7.44%. Over the course of 2015, cap rates for retail, office, and industrial properties declined by 15, 35 and 26 bps respectively.

Investors‘ interest has increased due to the stable returns generated by this asset class, Boulder officials say. And this intense competition is happening as the supply of net lease assets on the market goes down. From the third quarter of 2015 to the fourth quarter of 2015, the overall supply decreased by more than 11%. Retail assets experienced the largest decline of 12.5%.