As new construction remains modest, a key question in the net lease market is where future deal flow will come from.

Cap rates in the net lease sector are at all-time lows. That statement (of the obvious) in and of itself is not a headline. The change in the mix of properties making up what is being sold today versus the last few years is, however, worth looking at. The properties that have been driving the ever lower cap rates are ironically the ones with less credit behind them. Indeed for each year over the past…

Like much of the net-lease market, Dollar General cap rates have been compressing since 2009. However, as we approach the end of 2015, it is increasingly likely average cap rates for Dollar General stores will set an all time new record.

Last week's announcement of Walgreens $17B+ acquisition of Rite Aid has sent reverberations throughout the single-tenant net-lease world. The merger would combine the country's largest and third largest pharmacies, creating a retail behemoth with well over $100B+ in annual sales.

Founded in 1971, Starbucks is a global brand in the quick service retail sector, specializing in the sale of high-margin specialty coffee. For the fiscal year ending 2014, Starbucks generated revenue of $16.44 billion and net income of $2.07 billion, with an extremely impressive gross margin of 58.54% and pre-tax operating margin of 18.7%. As of September 2015, its stock had appreciated 48% on a year-over-year basis. …

Below is a chart that shows the average cap rates of over 7,000 single tenants net-lease (STNL) sales captured over the last nine years. The red line represents the moving average of the last 200 sales at any given point in time.

One metric that Calkain uses to partially measure supply in the market is the change in average lease years remaining at the time of sale on a quarter-by-quarter basis. An increase means the mix of properties being sold is newer, which could be caused by several things, however in our experience it's primarily due to new construction. …

When it comes to net lease properties, buyers and sellers often focus on investment aspects such as tenant creditworthiness, lease years remaining, and rent escalations. To be sure, these aspects are critical in the net lease arena. However, it is essential to recognize that, at the end of the day, real estate is about location, and a good location can overcome many weaknesses in fundamentals. …