Second-Quarter Net Lease Market Overview

The Boulder Group’s “Net Lease Market Report, Q2 2014” provides comprehensive data and analysis of second-quarter 2014 activity in the national single-tenant net lease market. Cap rates for net lease retail properties compressed by 25 basis points, reaching “a new historic low rate of 6.50 percent. Cap rates for the industrial sector compressed minimally by three basis points to 7.97 percent while cap rates in the office sector rose 13 basis points to 7.77 percent during the quarter,” … “due to the residual concern of ongoing vacancy challenges facing the suburban and secondary office markets.”

“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 basis points over the office and industrial sectors respectively,” the report continues. While the overall supply of net lease assets increased by 16.6 percent compared to the first quarter of the year, “quality offerings with long term leases to investment grade rated tenants remain in limited supply.”

The report predicts that “non-institutional investor demand throughout the net lease market will grow as the flight to the stable yields generated by this asset class should continue” and adds that “as the individual investor demand continues to accelerate, some of the perennial institutional net lease buyers are finding it difficult to compete with their non-institutional counterparts.”

The Boulder Group is an investment real estate service firm specializing in single-tenant net lease properties.

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