NORTHBROOK, IL-Net lease cap rates dropped across the country among retail, office and industrial markets in the first quarter, according to a report by locally based Boulder Group. Retail net lease dropped to 7.83%, office dropped to 8% and industrial dropped to 8.42%.

Randy Blankstein with the company tells GlobeSt.com that cap rates had been climbing in all asset types for the past year, but now the trend looks more like a plateau. He says interest rates will likely rise, and sellers and developers will put more product on the market, keeping the cap rates at about even the rest of the year.

He says net lease demand has come from investors who are in pursuit of a focused investment strategy heavily concentrated in the bank and drugstore sectors, and ground leases. “Geographically, the top 25 ‘NFL’ metropolitan areas are a huge share of activity, where there’s overwhelming demand for core offerings, and only a little investment going after second- and third-tier markets. The spreads will continue to increase as financing gets better,” Blankstein says.

Walgreens and CVS stores were big sellers in the first quarter. Three CVS stores sold in January in Florida markets for an average of $5.5 million and an average cap rate of 7.33%. Three Walgreens sold in February in Minnesota, Florida and Georgia for an average of $5.7 million and an average cap rate of 6.97%. On Thursday, Boulder put out for sale a Walgreens in West Allis, WI for $5.1 million and a cap rate of 7.43%.