Big Box Cap Rates Sink Low

CHICAGO—Developers across the country have been careful about building new retail outlets even though the recession officially ended several years ago. This lack of new construction has pushed down cap rates for net lease product that does hit the market as investors line up to make bids.

“Cap rates in the single tenant net leased big box sector compressed from the fourth quarter of 2012 to the fourth quarter of 2013 by 63 bps,” according to latest report from the Boulder Group, a net lease firm based in suburban Chicago. The decline from a 7.73% cap rate last year to 7.10% by the end of last quarter parallels a similar decline in other retail properties. As reported last month in GlobeSt.com, Boulder found that rates in the net lease retail market sank from 7.02% in the third quarter to 6.85% in the fourth, the data show, and the first time in the past decade that sector’s rate fell below 7.0%.