CHICAGO—Cap rates for single tenant net lease retail propertieshave sunk yet again, continuing a plunge that began roughly threeyears ago, according to a new study on the second quarter by theBoulder Group, a commercial real estate firm insuburban Chicago. The cap rates for retail properties went down to6.5%, a decline of 25 bps from the last quarter, when rates had hitan already historic low of 6.75%. One year ago the retail ratestood at 7.0%.

"The retail sector experienced the third straight quarter ofhistorically low cap rates as a result of increased demand and thecontinually growing investor pool seeking the stable yield of theasset class,” according to Boulder researchers. “Retail net leaseassets remain the most desired property type in the net leasemarket as evidenced by the cap rate premium of 127 and 147 bps overthe office and industrial sectors respectively.”

Rates for industrials were at 7.97%, a decline of only 3 bps,roughly the same level as one year ago. Office properties were theonly sector that saw cap rates go up significantly, from 7.64%during the first quarter to 7.77%, the second consecutive quarterthat the rate increased. Boulder attributes this “to the residualconcern of ongoing vacancy challenges facing the suburban andsecondary office markets.”