But franchisees lease the majority of properties in the QSR sector, and cap rates for franchisee properties can vary significantly. Some have less than ten locations and investors typically see these operators as riskier than those with hundreds of locations. And corporately guaranteed QSR properties were priced at a 40 bp premium over franchisee backed properties.

Concerns about the impact of e-commerce on the long-term health of retail should keep investors focused on fast food. “Furthermore, 1031 exchange and private buyers will continue to seek these assets as they offer low price point acquisition targets with long term leases, rental escalations and zero landlord responsibilities.”

CHICAGO—E-commerce may have hit many retailers hard, but some, at least from an investment standpoint, have seen benefits. Investors keep gravitating towards the quick service restaurant sector, pushing its median cap rate below other kinds of retail outlets. In the second quarter of 2017, the rate fell to just 5.56%, a 14 bp decline when compared to the prior year, according to a new study by the Boulder Group, a net lease firm in Northbrook, IL. Corporate leased QSR properties were more popular. Cap rates for that subsector decreased by 10 bps to 5.35% while franchise properties declined by 5 bps to 5.75% cap rate.

The decline among QSR properties is happening at the same time cap rates have finally started to increase across the overall single tenant net lease sector. Earlier this year, after a six-year slide to historic lows, retail cap rates increased to 6.23%. “Investors continue to target the QSR sector as it is e-commerce resistant and is a popular alternative for 1031 investors when compared to other low priced net lease properties,” according to the report.

“The QSR sector should slightly outperform the overall retail net lease sector in the near to medium term,” Randy Blankstein, president of Boulder, tells GlobeSt.com.

“New construction QSR properties are in the greatest demand amongst investors as they exhibit the criteria that many 1031 exchange and private buyers seek,” the company adds. Most of these outlets, for example, have absolute triple-net leases with scheduled rental escalations in the primary term. QSR properties constructed in the past two years saw their median cap rate, now at 5.25%, compress another 15 bps in the past year. McDonald's restaurants were among the most desirable. Median cap rates for these stores fell another 10 bps to just 4.00%.

But franchisees lease the majority of properties in the QSR sector, and cap rates for franchisee properties can vary significantly. Some have less than ten locations and investors typically see these operators as riskier than those with hundreds of locations. And corporately guaranteed QSR properties were priced at a 40 bp premium over franchisee backed properties.

Concerns about the impact of e-commerce on the long-term health of retail should keep investors focused on fast food. “Furthermore, 1031 exchange and private buyers will continue to seek these assets as they offer low price point acquisition targets with long term leases, rental escalations and zero landlord responsibilities.”