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Historic Net Lease Bank Cap Rates

Cap rates for net lease banks and Bank of America specifically are at their lowest point in eight years.

By Jonathan Hipp | Updated on November 20, 2014

Cap rates for net lease banks and Bank of America specifically are at their lowest point in eight years. So far in 2014, net lease banks have averaged a cap rate of 5.93% while Bank of America averaged an even lower 5.06%. For comparison, in 2007 at the height of the previous real estate boom, banks averages 6.08% and Bank of America 5.54%. A 15 and 48 basis point difference respectively.

There are several reasons for the current market’s historic cap rate lows. The past recession caused a halt in nearly all new construction. This resulted in a stagnant and dwindling pool of assets. Interest rates were also dropped to historic lows – making financing very achievable. Furthermore, a “flight to quality” ensured investors were looking for properties with strong fundamentals such as long lease term, prime location, and investment grade tenant. All these factors have driven a compression in cap rates for net lease properties and especially banks and Bank of America (Rated A- by S&P).

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