One of the most important distinctions in the net lease market is the difference between credit and non-credit tenants. Though we can speak in general terms about overall net lease trends, it is important to understand high credit tenants have consistently separated themselves from those of lesser investment grade. Tenants such as McDonald’s, Wal-Mart, Walgreens and Banks routinely demand lower cap rates due to their guarantee of rent payment.
We can see this clearly by observing net lease cap rate trends over the past few years. Though cap rates for credit tenants almost parallel the trend line for overall net lease cap rates, they always retain a relatively high level of separation. Recently, we have observed this spread increase further as the lack of high credit tenants on the market continues. A general ease in lending conditions has increased the demand from buyers – compressing high credit tenant cap rates further.
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Jonathan Hipp
Jonathan Hipp began his career in real estate over 25 years ago. In his early years as a broker, he ventured into the net lease industry and quickly began leading the US net lease market, closing over $3 billion in transactions. In 2005, Jon founded Calkain Companies, a company focused solely on net lease investment services. As President and CEO, he has been instrumental in building the firm into one of the leading Net Lease real estate companies, transacting over $12 billion of net lease deal volume over the past 13 years. He has expanded Calkain’s services to include brokerage, advisory, asset management, capital markets, and industry research. He has become a well-known resource, panelist, and speaker at various Net Lease and Industry conferences and is a regular contributor to GlobeSt.com on real estate trends. In June 2015, Jon’s passion for the real estate business was again recognized as he was nominated for the Top Real Estate Player in the DC area by SmartCEO magazine.
