Within the single-tenant net lease space, I often get asked whether I believe there is a bubble in commercial real estate due to cap rates being below 2006 levels. The honest answer is I don't know, and neither do most people. Bubbles are generally discovered only after they pop.
I can, however, provide you macroeconomic data that highlights some critical differences between the current situation and the years leading up to the financial crisis. In my mind, these differences justify a continued optimism for the STNL market.
Below is a graph comparing three things:
- Average cap rate by year from Calkain's STNL Comp Database (blue)
- Average retail cap rates by year from Real Capital Analytics (green)
- 10 Year US Nominal Treasury Rates (red)
In purple is the spread between the average of 1 and 2 and Treasury rates.
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