The entire net lease market has seen compressing cap rates. Thecombination of multiple factors has led to this declining cap rateenvironment. First, we have seen that low interest rates and a lowyield investment environment has impacted cap rates. Because cheapdebt is available and the risk free investment returns are so low,investors are able to pay premuims (lower cap rates) for net leaseassets and still achieve a spread that is appealing in today'smarket.
There is limited net inventory availble due to the fact thatretail slowed their expansion and growth plans since 2008. Coupledwith a flight to quality by investors the simple fundamentals ofsupply and demand are driving cap rates lower.
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