The first quarter of 2017 can be summed up with a single word: Stable. According to our Calkain research team, the entire market only moved 11 bps. This lack of movement was driven by the Dollar Store and Pharmacy sectors.
The Dollar Store sector saw cap rates fall by 16 bps, in line with the overall market movement. The movement of the major tenants, Family Dollar (-28 bps) and Dollar General (-15 bps), paints a deceiving picture. When looking at prime deals (10+ years remaining on the lease), the movement goes from small to near zero. Prime Family Dollar deals fell a mere 16 bps to 6.18% while prime Dollar General deals fell by 3 bps to 6.65%.
In the Pharmacy sector, the story is much of the same. On the whole, there was some movement but when evaluating prime deals this movement disappears. On the surface, CVS transactions have become significantly more valuable with cap rate compression of 53 bps. After filtering out the short term deals, CVS moved from 5.66% to 5.58% yet this does not indicate any significant movement. Walgreen's upward movement runs counter to the overall market's downward movement and the Pharmacy sector's near zero movement. After filtering the short term deals, Walgreens' experienced a small compression of 12 bps to 5.66%.
These are only two sectors of the net lease market place, so they don't necessarily represent what was going on globally. The Quick-Service Restaurant segment (QSR) had a slight downward movement in cap rates. This was primarily driven by sales of newer stores. The Big-Box and C-Store sectors also showed small downward movement in cap rates. This was mainly due to a change in the credit profile of the tenant's quarter over quarter. Sales of deals with stronger credit pulled the sector average down.
Click here for the full report.
The first quarter of 2017 can be summed up with a single word: Stable. According to our Calkain research team, the entire market only moved 11 bps. This lack of movement was driven by the Dollar Store and Pharmacy sectors.
The Dollar Store sector saw cap rates fall by 16 bps, in line with the overall market movement. The movement of the major tenants,
In the Pharmacy sector, the story is much of the same. On the whole, there was some movement but when evaluating prime deals this movement disappears. On the surface, CVS transactions have become significantly more valuable with cap rate compression of 53 bps. After filtering out the short term deals, CVS moved from 5.66% to 5.58% yet this does not indicate any significant movement. Walgreen's upward movement runs counter to the overall market's downward movement and the Pharmacy sector's near zero movement. After filtering the short term deals, Walgreens' experienced a small compression of 12 bps to 5.66%.
These are only two sectors of the net lease market place, so they don't necessarily represent what was going on globally. The Quick-Service Restaurant segment (QSR) had a slight downward movement in cap rates. This was primarily driven by sales of newer stores. The Big-Box and C-Store sectors also showed small downward movement in cap rates. This was mainly due to a change in the credit profile of the tenant's quarter over quarter. Sales of deals with stronger credit pulled the sector average down.
Click here for the full report.
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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.
