CHICAGO—Equity continues to enter the commercial real estate sector and push down cap rates for net lease properties, according to a new report from the Boulder Group, a commercial real estate firm located in suburban Chicago. After hovering steady at 6.5% for several quarters, cap rates in the first quarter of 2015 for the single tenant net lease retail sector reached a new historic low of 6.4%. Furthermore, a renewed faith in the nation's industrial sector resulted in a precipitous drop from 8.03% to 7.7% for industrial properties. Office cap rates rose slightly to 7.35%.

Retail assets have long commanded the lowest cap rates due to demand from private and 1031 investors who “prefer retail over office and industrial due to their familiarity with the tenants,” Randy Blankstein, president of Boulder, tells GlobeSt.com. "The brand name is what attracts investors initially and then they move on to the other criteria." Retail properties typically have long leases, lower prices and triple net lease structures that allow these owners to remain largely passive.

The 33 bps decline among industrial assets may not be surprising considering how much the outlook has improved for the industrial economy. “Strengthening fundamentals throughout North America support a positive forecast for the next three years,” Maria Sicola, head of research for the Americas group at Cushman & Wakefield, recently said. “Trends in supply and demand are favorable across all major and secondary markets, with an overall decline in vacancy,” added John Morris, C&W's leader, industrial services for the Americas. The firm recently pegged the vacancy rate at just 6.7%.