Q1 Cap Rates for Single Tenant Bank Properties Shrink

Market conditions in the net lease sector combined with an increase in supply of longer leased properties make an impact.

Net lease bank real estate continues to be a strong performer, according to The Boulder Group’s recently issued Net Lease Bank Ground Lease Report.

National asking cap rates in the space decreased to 5.15% in Q1, representing a 20-basis point increase when compared to the prior year, The Boulder Group reported.

“[This move] can be best attributed to overall market conditions in the net lease sector combined with an increase in supply of longer leased properties,” Randy Blankstein, President, The Boulder Group, said in a prepared statement.

Top concerns for net lease investors interested in the net lease bank ground lease sector include closings and changing bank footprints. 

Digital Banking Continues to Grab Share

Nearly 3,000 bank branch locations were closed net of openings in 2021, according to S&P Global Market Intelligence data.

That number of closings represents less than 5% of the bank branches in the United States, according to The Boulder Group.

Jimmy Goodman, Partner, The Boulder Group, said in prepared remarks that “as digital banking continues to grab a larger share of transactions, investors will remain steadfast in investing in strong locations with above average deposits.”

Despite the contraction of physical bank branches, the supply of net lease bank properties increased, according to The Boulder Group.

The median remaining lease term for bank ground leases exceeded 10.5 years in the first quarter.