CHICAGO—The US dollar store sector has continuedto expand in the past year due to consumers' demand for low-costgoods. That expansion has also opened up a lot of opportunities forinvestors that want to jump into this robust segment of retail. Caprates for single tenant net lease dollar stores increased by 15 bpsfrom the second quarter of 2015 to the second quarter of 2016 to a6.65% cap rate, according to a new report from theBoulderGroup, a net lease firm inNorthbrook, IL.In its report,the company examined recent sales of free standingDollarGeneral,Dollar TreeandFamily Dollarproperties, as these tenants represent thelargest presence within the sector. Cap rates for Family Dollarassets remained unchanged at 6.5%, while Dollar General and DollarTree experienced increases of 10 and 15 bps each, to 6.6% and 7.0%,respectively. Each of these tenants has expansion plans, so astrong pipeline of new construction assets should remain. “The demand is being driven by retailers' desirefor smaller locations that are closer to the customer base,”RandyBlankstein, president ofBoulder, tells GlobeSt.com. “The dollar stores small store formatis able to serve secondary and tertiary markets that currently havea lack of national retail options.”Furthermore, “growth in the net lease marketcomes from many tenants in the discount retailer sector. Inaddition to dollar stores, some of the names expandingincludeAldi,Ross,GoodwillandTJMaxx.” Dollar General and Family Dollarcontinue to make up the majority of the supply in the single tenantdollar store sector with Dollar General leading the supply with 62%of the sector. Dollar Tree stores only made up 7% of the totalsupply as these outlets are more commonly located withinmulti-tenanted assets.In thesecond quarter of 2016, the discount associated with net leasedollar store assets when compared to the net lease retail sectorwidened by 37 bps. “A contributing reason for the increase is manylarge institutional buyers previously acquired a significant numberof dollar stores and reached their capacity,” the report notes. And“many lenders have filled their dollar store allotment and are notoffering the same financing options as other net lease assets.“But dollar stores remainattractive to 1031 and private investors as they offer long-termleases with low price points. Recently, for example, Family Dollarchanged its lease structure to be more competitivewith Dollar General. Formerly, new construction Family Dollarleases were 10 years, double net and did not contain rentalescalations in the primary term. But the new standard lease is 15years, triple net and contains a series of rental escalations. Andin the second quarter of 2016, the median asking price for the netlease dollar store sector was just $1.36 million.Dollar General Corp.CHICAGO—The US dollar store sector has continuedto expand in the past year due to consumers' demand for low-costgoods. That expansion has also opened up a lot of opportunities forinvestors that want to jump into this robust segment of retail. Caprates for single tenant net lease dollar stores increased by 15 bpsfrom the second quarter of 2015 to the second quarter of 2016 to a6.65% cap rate, according to a new report from theBoulderGroup, a net lease firm inNorthbrook, IL.In its report,the company examined recent sales of free standingDollarGeneral,Dollar TreeandFamily Dollarproperties, as these tenants represent thelargest presence within the sector. Cap rates for Family Dollarassets remained unchanged at 6.5%, while Dollar General and DollarTree experienced increases of 10 and 15 bps each, to 6.6% and 7.0%,respectively. Each of these tenants has expansion plans, so astrong pipeline of new construction assets should remain. “The demand is being driven by retailers' desirefor smaller locations that are closer to the customer base,”RandyBlankstein, president ofBoulder, tells GlobeSt.com. “The dollar stores small store formatis able to serve secondary and tertiary markets that currently havea lack of national retail options.”Furthermore, “growth in the net lease marketcomes from many tenants in the discount retailer sector. Inaddition to dollar stores, some of the names expandingincludeAldi,Ross,GoodwillandTJMaxx.” Dollar General and Family Dollarcontinue to make up the majority of the supply in the single tenantdollar store sector with Dollar General leading the supply with 62%of the sector. Dollar Tree stores only made up 7% of the totalsupply as these outlets are more commonly located withinmulti-tenanted assets.In thesecond quarter of 2016, the discount associated with net leasedollar store assets when compared to the net lease retail sectorwidened by 37 bps. “A contributing reason for the increase is manylarge institutional buyers previously acquired a significant numberof dollar stores and reached their capacity,” the report notes. And“many lenders have filled their dollar store allotment and are notoffering the same financing options as other net lease assets.“But dollar stores remainattractive to 1031 and private investors as they offer long-termleases with low price points. Recently, for example, Family Dollarchanged its lease structure to be more competitivewith Dollar General. Formerly, new construction Family Dollarleases were 10 years, double net and did not contain rentalescalations in the primary term. But the new standard lease is 15years, triple net and contains a series of rental escalations. Andin the second quarter of 2016, the median asking price for the netlease dollar store sector was just $1.36 million.