The volume of transactions for the single-tenant net lease market in the first half of 2023 fell well below the level for the prior year, according to a new report from The Boulder Group. As a result, the supply of properties is increasing as properties sit on the market longer. 

Owners are reacting by holding their assets longer, rather than consider a sale. In 2Q 2023 the number of properties coming on the market was 20% fewer than in the first quarter. In recent years, owners could sell their properties for more than the purchase price because of cap rate compression, even though the lease term was shorter, the report noted. "This strategy no longer holds true in the current cap rate environment," it added, leading owners to hold on.

Consistent with other reports, The Boulder Group found that cap rates in the single-tenant net lease market have risen for five consecutive quarters in all three sectors: retail, office and industrial. For retail, the jump was 7.27% (27 bps), while office and industrial each rose 6.8% (3 bps) in the second quarter.