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Cap Rates Rise for Big Box Retail

Investors are concerned about the evolving square footage demands for big box retailers.

By Brian J. Rogal | Updated on February 05, 2018

Cap rates for these properties increased by 25 bps to 6.75% from the fourth quarter of 2016 to the fourth quarter of 2017

CHICAGO—The long-term slide of cap rates for single tenant net lease properties began to reverse within the past year or so, and that’s especially true of the big box sector. Cap rates for these properties increased by 25 bps to 6.75% from the fourth quarter of 2016 to the fourth quarter of 2017, according to a new report from the Boulder Group, a net lease firm in suburban Chicago.

The firm attributes that rise “to investor concern about the evolving square footage demands for big box retailers.” E-commerce has been forcing many stores to change how they serve customers, and that usually means shrinking. For example, Kohl’s recently decided to decrease its stores’ footprints and bolster digital offerings.

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