Retail Cap Rates Plunge Again

CHICAGO—Cap rates for single tenant net lease retail properties have sunk yet again, continuing a plunge that began roughly three years ago, according to a new study on the second quarter by the Boulder Group, a commercial real estate firm in suburban Chicago. The cap rates for retail properties went down to 6.5%, a decline of 25 bps from the last quarter, when rates had hit an already historic low of 6.75%. One year ago the retail rate stood at 7.0%.

“The retail sector experienced the third straight quarter of historically low cap rates as a result of increased demand and the continually growing investor pool seeking the stable yield of the asset class,” according to Boulder researchers. “Retail net lease assets remain the most desired property type in the net lease market as evidenced by the cap rate premium of 127 and 147 bps over the office and industrial sectors respectively.”