There is a constrained supply of net lease properties on the market – continuing the trend of record low cap rates. Pharmacies are trading at even lower rates than net leases on average. High credit tenants such as Walgreens and CVS are in the highest demand – with many investors willing to pay premiums for corporate guarantees and long leases.
Though there has been some talk of increasing interest rates forcing cap rates upward – these interest rate increases have already been absorbed. This is because even though interest rates may be rising - they still remain at historic lows compared to the previous market high in 2006. During that boom, investors were commonly dealing with interest rate vs cap rate spreads of 60 bps. Today - even with the interest rate increases - that spread stands at 200-250 bps. As a result, it still makes sense for transactions to trade at these seemingly bold low rates.
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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.
