New Walmart Markets Depress Cap Rates

CHICAGO—The single tenant net lease big box sector saw a significant shift in 2015, according to the latest report from the Boulder Group, a net lease firm based in suburban Chicago. Cap rates compressed from the fourth quarter of 2014 to the fourth quarter of 2015 by 63 bps to 6.08%. That decline was steeper than seen in the entire net lease retail sector, which compressed by only 25 bps during the same period. This represents the first time since 2010 that the big box sector was priced at a premium to the entire retail net lease market.

Boulder attributes much of the compression in the big box sector to the introduction of Walmart Neighborhood Market properties to many markets throughout 2015. The number of these stores available in the fourth quarter increased by about 200% when compared to the prior year and now make up about 22% of the big box sector. The median asking cap rate for these smaller Walmarts was 5.10% leading to much of the cap rate compression within this sector.