CHICAGO- The cap rates for single-tenant netleased retail and office properties increased for the first time intwo years during the third quarter, according to a new reportfrom The BoulderGroup, a commercial real estate services firmlocated in suburban Chicago. The historically low rates for retail,however, only went up 2 bps, from 7.00% to 7.02%, while officerates went from 7.54% to 7.70%. The cap rates for industrialproperties remained steady at 8%.

Boulder attributes the bump in cap rates to theincrease in interest rates that hit over the summer. Some sectorsof the market, however, seem immune. “Cap rates for net leasedproperties valued below $8 million have not experienced the samecap rate impact,” the firm notes. “Properties priced below $8million are in the highest demand amongst individual investors.Individual investors are more likely to pay lower cap rates than aninstitutional investor as they do not have to meet the same returnhurdles and frequently utilize 1031Exchanges.”

In addition, the number of both retail andoffice properties added to the net lease market declined by morethan 9%, causing a downward pressure on cap rates that moderatedthe impact of increased interest rates. In the third quarter, 2,502properties were added to the retail sector, a decline of 9.3% fromlast quarter. And 232 properties were added to the office market, adecline of 10.1%.

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Brian J. Rogal

Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.