In the first quarter, single-tenant bank ground lease national asking cap rates decreased 12-basis points year-over-year to 5.35%, according to the 2021 Net Lease Bank Ground Lease Report from The Boulder Group.

Randy Blankstein, president of The Boulder Group, says the investment-grade credit of the tenants and the low-interest-rate environment have combined to drive rates down. In Q1, bank properties with leases of more than 18 years commanded median cap rates of 4.30%, a 10-basis point decrease year over year.  Banks with leases of 14 to 17 years commanded cap rates in the 4.8% range, while those with leases from 10 to 14 years fetched cap rates of 5.07. With leases lasting less than ten years, cap rates were 5.90%.

While long-term leases garner the lowest cap rates, Blankstein says short-term leases with strong underlying real estate fundamentals have value among investors who are willing to take on more risk through potential re-tenanting or redevelopment of a property.