CHICAGO-National cap rates increased in the second quarter, adynamic not seen since a year ago, according to a second quarternet lease market report by the locally-based Boulder Group.However, the company says any movement is mostly just in theprimary markets, with secondary and lesser markets still strugglingto see activity.

|

Randy Blankstein, president of the company, said the increase ofinvestor demand returning to the single-tenant market can beattributed to continued improvement in the financing market asbanks, credit unions and life companies have become more activeafter a dismal 2009. “The story is pretty simple, with financingcoming back, cap rates are coming down,” he tells GlobeSt.com.

|

However, he says the majority of activity in the market has beenreduced to two segments. One market segment of investors is focusedon sub-8% cap rate properties under $10 million that are leased toinvestment-grade rated tenants in core metropolitan areas, withlong-term leases. The other segment is comprised of yield buyers,at 9% cap rates and higher, who are seeking opportunistic returnstrategies by targeting second-tier markets, non-investment gradetenants or shorter-term leases. “It’s a bifurcated market at thispoint,” Blankstein says.

|

Even though supply will likely dwindle because of barely any newconstruction, investors are still waiting for a bigger push untilit’s known where interest rates will go, he says. Tenants are alsostill in limbo, though there is more movement than last year.“People are waiting for more signs of a recovery before they startexpanding again,” Blankstein says.

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.