Ample liquidity remains in the US net lease market despite easing momentum in the second half of last quarter, with what analysts at JLL are calling "real-time pricing discovery" underway leading into the second half of the year.
Deals are repricing versus peak values, with further pressure expected as rate hikes continue. Market participants are contending with the impacts of inflation and the Fed's response and while initially re-pricing was debt-driven, a broader assessment of risk is now afoot. The average cap rate for the office sector was 6.3%, a 20 bps change year-over-year, while industrial clocked in at 5.6% (up 10 bps), and retail was 5.8% (down 20 bps year-over-year).
Excluding entity-level deals, Q2 single tenant volume was off 20% from a record first quarter, according to JLL and Real Capital Analytics data.
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"Investors are 'stress-testing' based on future rate increases and the potential for a recession," the JLL report notes. Debt markets are also volatile and posting upward pricing pressure across assets.
Overall, JLL analysts say all property sectors are already ahead of last year's pace and that owners of assets with so-called "significant gains" will continue to be active in the marketplace.
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