CHICAGO- The cap rates for the single-tenant net-leased market remained at historic lows during the first quarter of 2013, according to The Boulder Group, a commercial real estate services firm located in suburban Chicago. The cap rates for industrial and office properties went down while those for retail were unchanged from the last quarter.
The firm also found that the supply of properties, especially new construction, continues to have a major impact. "Overall property supply across the entire net lease sector decreased by more than 17% from the fourth quarter of 2012 to the first quarter of 2013," the firm says. Only 2,392 properties were added to the retail sector, a decline of 16% from last quarter. Furthermore, only 213 properties were added to the office market, a decline of more than 34%.
Despite this, the spread between the median asking rate and the closed cap rate grew from 10 basis points to 31 and for the office sector, from 50 to 81. According to Boulder, "this can be attributed to an increasing number of owners of properties with short-term leases trying to capitalize on the high investor demand for single tenant properties with long-term leases."
Boulder believes that for the remainder of 2013 the single-tenant net-lease market will remain robust. They conducted a national survey of active net-lease participants and 70% predicted that cap rates will either decline or remain steady, with 12% believing cap rates will decrease 25 basis points or more. Therefore, “properties with long-term leases will be more difficult to find as many current owners will hold given the attractive refinance rates available.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
