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C Store Cap Rates Rise; Industry Consolidation Continues

'We're actively looking at acquisitions in all [retail] industries, but we're particularly interested in convenience stores and movie theaters.'

By Michelle Napoli | Updated on June 04, 2009

ORLANDO-Despite the overall transaction market trend, sales of convenience store/gas station properties were relatively strong last year, according to the first half 2009 single-tenant retail report from Marcus & Millichap Research Services. Rising average cap rates for the property niche – in 2008, they reached their highest since 2002 – is one factor credited with fueling an increase in transactions.

“In 2008, sales velocity…surpassed the levels recorded in the prior year, as investors were attracted to the sector’s cap rates, which increased roughly 80 basis points in that time to the low-8% range,” the report states. “As profitability among operators continues to accelerate, these properties will likely remain a preferred choice among investors.”

That said, sales transactions slowed in the latter part of the year and have yet to show significant signs of picking up thus far in 2009, says Steve Horn, senior vice president of acquisitions for Orlando-based National Retail Properties Inc. At the same time, cap rates are moving in the opposite direction. “Cap rates have edged upward in the c store industry,” Horn says.

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