NNN Retail Returns Decouple from Benchmark Piquing Investor Interest

Chris Lomuto of Northmarq discusses the rising cap rates and decreasing values in the retail market, causing uncertainty for investors in the single tenant market, ahead of the ICSC Las Vegas conference.

LAS VEGAS—The retail market is experiencing significant changes as cap rates continue to rise while values decrease, causing a decoupling of NNN returns from benchmark returns. This has piqued the interest of many investors in the single tenant market, including Chris Lomuto, Northmarq Associate Vice President, who spoke with GlobeSt.com about the topic in anticipation of the ICSC Las Vegas conference next week in Las Vegas.

Lomuto noted that cap rates have been rising at an average of 5-6 basis points per month, leading to a compression in the spread between NNN and benchmark returns.

The sustainability of this trend remains to be seen and may depend on investor expectations about the macro-economy, he notes. If investors anticipate a turnaround in benchmark returns, they may become more comfortable with lower cap rates, assuming that higher rates were a temporary phenomenon. However, if investors believe that elevated benchmark rates and inflation are here to stay, NNN cap rates may continue to drift higher.

This uncertainty has created challenges for buyers and sellers in the single tenant market, as they attempt to navigate the shifting landscape. It remains to be seen how long this trend will continue and what impact it will have on the retail market as a whole. As Lomuto noted, the market is constantly evolving, and investors will need to stay informed and adapt their strategies accordingly.

Stay tuned for more coverage of the ICSC Las Vegas event from GlobeSt.com, including exclusive insights from attendees.

Also, check out the related stories already posted below: