Cap rates for banks have continued to compress in lock-step with all-retail cap rates, falling another 14 basis points from the 2012 year end rate of 6.07%, breaking below the 6% threshold to 5.93%, just 3 basis points shy of the 2006 low point. This compression is consistent with overall rate trends, however when reviewing the data further, bank cap rates have been running 100+ basis points lower than all-retail rates since 2009. A more thorough analysis of the data points shows quantifiable evidence of the continued acquisitions by the risk averse investor. The post-recession era of acquisitions have been focused on those net lease properties which are leased to, and guaranteed by, the best in class banking tenants such as JP Morgan Chase, Wells Fargo, and PNC Bank while the pre-recession era saw a number of lesser credit-worthy banks comprising a larger percentage of the overall bank transactions.

Consistent with investor's flight-to-quality demands, net lease bank properties offer long term, passive leases, often in the form of a ground lease, occupied by investment grade tenants and almost always offering inflationary protection in the form of regular rental increases. The lack of new locations being delivered by both CVS and Walgreens has further enlarged the investor pool for net lease banks. Investors seeking a lease term greater than 15 years with an investment grade tenant are fairly limited in their selection, with options dominated by the leading pharmacies and financial institutions.

Read Full Report.