Like much of the net-lease market, Dollar General cap rates have been compressing since 2009. However, as we approach the end of 2015, it is increasingly likely average cap rates for Dollar General stores will set an all time new record.

While a portion of this compression can be attributed to increased demand across real estate in general, a major driver is change in product type, with new structures constituting a larger portion of sales.

After it failed to merge with Family Dollar, the company set out to use increased store construction as a growth engine. Because new stores tend to be fifteen year triple-net deals, newer stores entered the market and average cap rates compressed. Indeed, the average lease term for a sold Dollar General increased from 10.1 years in 2014 to 12.3 years in 2015, a 22% increase.

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Cap rates ticked up slightly in the third quarter perhaps simply due to noise in the data. It will be interesting to see what happens in Q1 2016 and if there is actually a trend here.

The graph below shows Dollar General cap rates since 2009. You can read more about them in Calkain's forthcoming Dollar Store Report.

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Instant Insights /

Spurred by New Construction, Dollar General Cap Rates Fall to New Lows

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