The Boulder Group announced the release of its 1st Quarter Net Lease Research Report today. The report features a comprehensive format with specific net lease sector information. Cap rates in the single tenant net lease sector increased for the eighth consecutive quarter within all three sectors in the first quarter of 2024. Single tenant cap rates increased to 6.42% (+7 bps) for retail, 7.60% (+5 bps) for office and 7.02% (+2 bps) for industrial.
“Cap rates in the first quarter of 2024 represented the highest levels since 2014 for single tenant retail properties,” says Randy Blankstein, President, The Boulder Group. “However, cap rates for single tenant retail and industrial assets remain lower than their 20-year historical average by approximately 40 basis points.”
“Elevated interest rates continue to impact transaction volume which is lower than prior years,” adds Jimmy Goodman, Partner, The Boulder Group. “A lack of 1031 exchange buyer activity is resulting in an increased supply of net lease properties on the market.”
Property supply in the single tenant sector increased by more than 9% when compared to the prior quarter. With limited transactions occurring, properties continue to be added to and stay on the market. Despite the headwinds in the market, certain sellers including merchant builders or owners with upcoming loan maturities look to meet market pricing.
“Net lease retail properties with the largest supply (dollar stores and drug stores) continue to experience the greatest cap rate expansion,” John Feeney, Senior Vice President, The Boulder Group adds. “Both of these sectors experienced double digit cap rate expansion in the first quarter of 2024.”
After multiple Federal Reserve meetings without any interest rate relief, investors will be monitoring upcoming rhetoric from the members of the Federal Reserve. Any cuts to interest rates would be welcomed by net lease owners looking to refinance or sell properties prior to year-end. With stability in the capital markets, the expectation from market participants is for increased transaction volume in the second half of 2024. However, an increase in transaction volume would be relative as transactions are not expected to be anywhere near the amount in prior peak markets including 2020 and 2021.
To view the full report: https://bouldergroup.com/media/pdf/2024-Q1-Net-Lease-Research-Report.pdf
About The Boulder Group
The Boulder Group is a boutique, Chicago-based investment real estate services firm specializing in transaction and advisory services for single tenant net lease properties. Founded in 1997, the firm has closed over $9 billion of net lease property transactions. The firm provides a full range of brokerage, research, advisory, and financing services nationwide. The level of annual, single-tenant transaction volume consistently ranks the firm in the top 10 companies nationally, according to industry benchmarks determined by CoStar and Real Capital Analytics.
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Website: https://www.bouldergroup.com/NNN-Properties-For-Sale.html