The groups's Research Department found that cap rates in the single tenant net leased auto parts store sector compressed from the fourth quarter of 2011 to the fourth quarter of 2012. The auto parts sector is defined by The Boulder Group in the report as Advance Auto Parts, AutoZone and O'Reilly Auto Parts, which are investment-grade rated companies.

The cap rate compression was derived by the combination of a lack of available newly developed assets and the limited availability of investment-grade assets under $2 million in the net lease market, the report says.

The report says that the auto parts sector is one of the only segments in the net lease market experiencing robust growth, with over 500 auto parts stores opened in 2012.

But despite expansion plans, many of the new stores will not be brought to market because the tenants already own a high percentage of the locations.

Demand for auto parts stores is strong, according to the report, because they offer long term leases to investment-grade tenants and are usually built as plain-vanilla boxes, which are easier to re-lease if the tenant vacates.

Fee simple auto part stores have an average asking price of $1,767,570 with an average price per square foot of $251 as opposed to ground leased AutoZone properties which have an asking price of $1,180,000, the report says.

The report shows that properties in the auto parts sector are trading at a 72 basis point premium to the net lease market as a whole due to the quality of the tenants and the length of their leases for newly constructed assets, the report says.

The retail industry shows strong consumer demand for auto parts stores in the current economy as consumers are repairing their vehicles instead of purchasing a new vehicle, according to the report.

Instant Insights /

Zoom, Zoom: The Boulder Group Reports On Net Lease Auto Parts Stores

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