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Net Lease Cap Rates – All Markets Are Not Equal

Professionals in the net lease community agree that, from an investor’s perspective, first there is New York and Washington DC with Chicago and San Francisco trailing behind and then everywhere else.

By Jonathan Hipp | Updated on January 26, 2011

What happened to cap rates in 2010?

Rick Fernandez: The year started strong with investors returning to the market as interest rates fell and debt became available to a larger pool of investors.  Unfortunately, the financial crisis in Greece and the potential for instability within the European Union quickly cooled the New Year’s optimism.  The net lease market changed again in early July in part due to another drop in lending rates and a lack of quality supply of NNN properties.  A more positive lending environment and improving market fundamentals along with the volatility of the stock market drove investors to look for more predictable and stable returns.  In a few markets, cap rates began to compress dramatically.  Sellers in these markets suddenly saw offers 50-100bps below the caps recorded at the beginning of the year. 

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