For almost every product out there, a discount is available for buying in bulk. The same is true for real estate, including single-tenant net lease properties. Bulk purchasing, which involves a buyer acquiring multiple properties from one seller in a single portfolio transaction, can save buyers 70 or more basis points in cap rate in some cases. It also allows the seller to execute a sale much faster than selling each property individually. This results in a simpler transaction with marginally lower transaction costs. Naturally, the downside for the seller is less proceeds.

The economy of scale bulk buyers obtain is the result of several factors, the major one being less competition. In general, the universe of potential buyers decreases as deal size increases. With portfolio sales, deal size can easily go into the tens, if not hundreds, of millions of dollars. At that level, most buyers are institutional investors and the market is less liquid. These buyers have less of an appetite for very low cap rate deals due to a variety of factors. They often need to maintain dividend yields, and when taking into consideration their own overhead costs, this means they need to buy at higher yields in order to pass on a reasonable yield to their investors. The net result is higher cap rates than comparable properties sold on an individual basis.

For example, below is a table of Walgreens portfolio deals compared with similar stores sold on an individual basis. Across all deals, the portfolios sold for +55 basis points higher than similar individual stores. In the end, the seller must determine whether the convenience of having one buyer is worth the loss of proceeds.