Cap Rates in Single Tenant Net Lease Sector Rise for 11th Straight Quarter in Q4 2024

AB Digital

Cap rates in the single tenant net lease sector increased for the 11th consecutive quarter within all three sectors in the fourth quarter of 2024

The Boulder Group announced the release of its 4th Quarter Net Lease Research Report today. The report features a comprehensive format with specific net lease sector information. Cap rates in the single tenant net lease sector increased for the 11th consecutive quarter within all three sectors in the fourth quarter of 2024. Single tenant cap rates increased to 6.52% (+2 bps) for retail, 7.78% (+3 bps) for office and 7.23% (+8 bps) for industrial.

"Sustained high interest rates and commentary from the Federal Reserve following the December meeting continues to negatively impact the market" says Randy Blankstein, President, The Boulder Group. "Overall cap rates rose to 6.76%, representing a three basis point increase from the previous quarter."

While transaction velocity in 2024 remains significantly off the peak of 2021, the fourth quarter experienced an uptick in investor activity. The spread between asking and closed cap rates remained flat or decreased for net lease properties.

"The change in bid-ask spread compression indicates a gradual alignment between buyer and seller expectations, something that was not experienced in early 2024" adds Jimmy Goodman, Partner, The Boulder Group.

"The majority of retail sub-sectors remained relatively consistent on a cap rate level. However, the drug store sector continues to experience immense upward pressure on cap rates" John Feeney, Senior Vice President, The Boulder Group adds.

In 2024, the drug store sector experienced the emergence of Rite Aid from bankruptcy, CVS exploring "strategic options" and the potential of Walgreens being taken private by private equity and store closures. As a result, the net lease drug store sector experienced a 23 basis point increase in the fourth quarter and an 8.5% increase in supply.

The net lease market continues to adjust to the higher rate interest rate environment experienced over the past year. Investors will be carefully monitoring the capital markets, especially following the commentary from the December Federal Reserve meeting. If short-term rates continue to decline, the expectation is for investors to get off the sidelines and into longer term duration assets including net lease.

To view the full report: https://bouldergroup.com/media/pdf/2024-Q4-Net-Lease-Research-Report.pdf

About The Boulder Group

The Boulder Group is a boutique, Chicago-based investment real estate services firm specializing in transaction and advisory services for single tenant net lease properties. Founded in 1997, the firm has closed over $9 billion of net lease property transactions. The firm provides a full range of brokerage, research, advisory, and financing services nationwide. The level of annual, single-tenant transaction volume consistently ranks the firm in the top 10 companies nationally, according to industry benchmarks determined by CoStar and Real Capital Analytics.

Media Contact
Company Name: The Boulder Group
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City: Wilmette
State: Illinois
Country: United States
Website: https://www.bouldergroup.com/NNN-Properties-For-Sale.html