CHICAGO—Investors have been pouring money into the single tenant net lease market, pushing down cap rates to historic lows, and demand for quick service restaurants, both corporate owned and franchisees, has accelerated in the past year, according to a new study by the Boulder Group, a commercial real estate firm in suburban Chicago.

“Buyers are moving past core metros in search of higher yield,” Randy Blankstein, president of Boulder, tells GlobeSt.com, and “the surge in QSR demand is causing more tenants to enter sale leasebacks to take advantage of current market pricing.”

Cap rates in the QSR sector sank to 5.9% in the second quarter of 2015 for properties leased to franchisees, a 35 bps decline since last year. And corporate leased QSR properties saw a 10 bps decline during the same time period. Unlike other net lease retail sectors, franchisees lease the majority of QSRs, and although investors typically prefer the corporate-guaranteed outlets, the cap rate spread between corporate and franchisee properties compressed from 50 to 30 bps in the second quarter.

“Investors have been increasingly willing to lower credit standards for increased yield in the QSR sector, especially in major markets or for properties with favorable lease structures,” according to the Boulder report. McDonald's ground leases had cap rates of just 3.95%, making these the most desired net-lease tenants in the market. The properties typically offer investors long-term leases, low-price points, regular rental escalations, a superior credit rating and one of the most-recognized brands in the US.

Other corporate-owned restaurants that saw a spike in demand include Panera Bread outlets. Last year, these properties had a cap rate of 5.25%, but declined to 5.08% this year. And corporate-owned Starbucks had one of the biggest drops, with cap rates falling 43 bps over the year, from 5.50% to 5.07%. Several franchisee properties also saw big drops, including those of KFC, Burger King and Taco Bell, all of which saw rates fall 35 to 55 bps.

Institutional investors usually don't want to spend much time on fast food net lease deals, most of which will only soak up less than $2 million. But a surplus of 1031 exchange investors with low equity requirements are attracted to the QSR sector because it features recognizable tenants with long lease terms, no landlord responsibilities and rental escalations. The median remaining lease term in the second quarter of 2015 in the QSR sector was 16 years, Boulder found. “As a result, the premium for net lease QSR assets was 60 bps over the entire retail net lease market,” or a 10 bps increase from last year.

“The single tenant net lease QSR sector will remain active as the lower price points, rental escalations and typical NNN lease structures of this asset type continue to attract private and 1031 exchange investors,” Boulder concludes. “With cap rate levels at historic lows for net lease retail, investors have altered their investment criteria to include franchisee credit in their search for increased yield.”