STNL Sales Continue Struggling Through Q2
Dollar transaction volume in the quarter was down 17.4% and cap rates were off by 63 basis points year over year.
For the second quarter of 2024, single-tenant net lease investment sales have faced a difficult time. According to the Northmarq market report by senior director of content and market research Lanie Beck, investment sales were $8.78 billion in the quarter. That was down 26.3% from the first quarter and a 17.4% drop from the second quarter of 2023.
The cap rate was 6.57%, down eight basis points in the first three months of the year, and 63 basis points down year-over-year.
By property type, office volume was $2.02 billion in the second quarter of 2024. That plunged 42.9% from the first quarter of 2024 and shrunk 20.5% from the previous year. Q2 average cap rates were 6.75%. That was up 36 basis points from 6.39% in Q2 2023 but down 7 basis points from 6.82% in the first quarter.
Industrial volume was $4.95 billion in Q2. That dropped 15.2% from the $5.84 billion of Q2 in 2023 but up 17% from the $4.23 billion in the first quarter. The average cap rate in 2024 Q2 was 6.46%, a five basis point fall from 6.51% in the first quarter but up 47 basis points from 2023 Q2.
Retail volume in the second quarter was $1.82 billion. It was down 19.1% from $2.25 billion in the second quarter of 2023 and down 56% from $4.14 billion in the first quarter of 2024. The average cap rate in Q2 2024 was 6.57%, a 19 basis points rise from 6.38% in Q1 and up 78 basis points from the second quarter of 2023, when the average cap rate was 5.79%.
It took the boost in industrial to reach $8.78 billion in the second quarter. Even with that, it was the second slowest quarter in 10 years, according to Beck, who said that without a volume boost in the second half of the year, the full 2024 would likely “fall short of matching last year’s stunted totals.”
It’s a question of whether there will be enough opportunities for transactions to advance. Interest rates are likely to drop, at least in September, but not guaranteed. Even if there were two, Beck said it would still take time for the market to adjust to the changes. There wouldn’t be a sudden jump. The real drivers of business by the end of the year will more likely be loan maturities with forced sales, acquisitions of distressed assets, and other tax-driven investment decisions like 1031 exchange activity.