WILMETTE, ILL. — The Boulder Group, based in Wilmette, has released its second-quarter net lease research report. Cap rates in the single-tenant net lease sector increased for the fifth consecutive quarter to 6.4 percent, a 13 basis point increase compared with the prior quarter, according to the firm. When broken down by sector, single-tenant cap rates increased to 6.17 percent (12-basis-point increase) for retail, 7.27 percent (27-basis-point increase) for office and 6.8 percent (3-basis-point increase) for industrial.
“The rise in interest rates, combined with available investment returns in other fixed income investment opportunities, continue to be the primary drivers for the upward pressure on cap rates,” says Randy Blankstein, president of The Boulder Group. “Accordingly, transaction volume for the first half of 2023 significantly lagged the pace of prior years.”
Additionally, Boulder Group says that certain segments within the net lease market such as dollar stores, drug stores and coffee users experienced an oversaturation of certain tenants. This resulted in a more significant rise in cap rates for the respective tenants.