As we head into summer, cap rates for net lease properties remain low. Net lease retail averages dropped from 7.06% in April to 6.84% in May. Dollar Stores highlighted this drop with cap rates dipping beneath 8% to a 7.47% average. While other sectors such as QSR and C-Stores posted minor cap rate increases, overall the net lease market is experiencing some of the boldest low cap rates in memory.
Investors continue to demonstrate heavy demand for net lease properties and supply remains limited. Though there was talk at the Las Vegas ICSC of new construction finally entering the pipeline, there will likely be some lag time before we see an impact on cap rates. Likewise, interest rate increases have been modest enough to not have a heavy impact. As summer comes into full bloom, deal flow will likely slow in pace due to the vacation season. Nevertheless, the net lease market looks to shine bright this summer.
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