CHICAGO—Cap ratesfor net lease properties have been trending downward for more thanfive years, and recently sank to historic lows. But that long-termdecline may be at an end. In the first quarter of 2016 cap ratesfor the single tenant net lease retail sector remained unchanged attheir historic low rate of 6.18%, according to a report just issuedby theBoulderGroup, a net lease firm insuburban Chicago. However, during the same timeframe, cap rates forthe office and industrial sectors increased 5 bps and 16 bps,respectively, to 7.25% and 7.26%.“Cap rates willlikely not go much lower unless interest rates fallfurther,” RandyBlankstein, president ofBoulder, tells GlobeSt.com. He attributes the retailsector's steadiness to strong demand from 1031 and private buyers.And the volatility of the capital markets was a contributing factorto the cap rate increases for the office and industrialproperties.Historically,institutional investors buy single tenant office and industrialassets; however, these “are more sensitive to the volatility of thefinancing markets in 2016 and have adjusted cap rates accordingly,”the company reports. “Throughout the course of the second quarterthe 10 Year Treasury Yield ranged from as high as 1.94 and as lowas 1.45.”Underneath theoverall rate stability, other changes are afoot. In the secondquarter of 2016, the spread between asking and closed pricingincreased for retail and office properties by 2 and 9 bpsrespectively. “Owners of net lease product have attempted to takeadvantage of the low cap rate environment over the course of 2016with aggressive pricing,” according to Boulder. “The widening ofthe spread between asking and closed cap rates illustrates the caprate pushback from buyers on the aggressively priced assets.” Thecompany also found that the marketing time for single tenantproperties has lengthened by about 11% when compared to the priorquarter.The majority of netlease participants expect cap rates to hold steady for the nearterm; however, “the perception is that there is upward pressure oncap rates,” Boulder says. “With the recent events in Europe and thesubsequent drop in the 10-year treasury, it is expected thatvolatility will increase for the near term.”CHICAGO—Cap ratesfor net lease properties have been trending downward for more thanfive years, and recently sank to historic lows. But that long-termdecline may be at an end. In the first quarter of 2016 cap ratesfor the single tenant net lease retail sector remained unchanged attheir historic low rate of 6.18%, according to a report just issuedby theBoulderGroup, a net lease firm insuburban Chicago. However, during the same timeframe, cap rates forthe office and industrial sectors increased 5 bps and 16 bps,respectively, to 7.25% and 7.26%.“Cap rates willlikely not go much lower unless interest rates fallfurther,” RandyBlankstein, president ofBoulder, tells GlobeSt.com. He attributes the retailsector's steadiness to strong demand from 1031 and private buyers.And the volatility of the capital markets was a contributing factorto the cap rate increases for the office and industrialproperties.Historically,institutional investors buy single tenant office and industrialassets; however, these “are more sensitive to the volatility of thefinancing markets in 2016 and have adjusted cap rates accordingly,”the company reports. “Throughout the course of the second quarterthe 10 Year Treasury Yield ranged from as high as 1.94 and as lowas 1.45.”Underneath theoverall rate stability, other changes are afoot. In the secondquarter of 2016, the spread between asking and closed pricingincreased for retail and office properties by 2 and 9 bpsrespectively. “Owners of net lease product have attempted to takeadvantage of the low cap rate environment over the course of 2016with aggressive pricing,” according to Boulder. “The widening ofthe spread between asking and closed cap rates illustrates the caprate pushback from buyers on the aggressively priced assets.” Thecompany also found that the marketing time for single tenantproperties has lengthened by about 11% when compared to the priorquarter.The majority of netlease participants expect cap rates to hold steady for the nearterm; however, “the perception is that there is upward pressure oncap rates,” Boulder says. “With the recent events in Europe and thesubsequent drop in the 10-year treasury, it is expected thatvolatility will increase for the near term.”