July 6, 2020
Cap rates in the single-tenant net lease retail sector increased by 10 basis points to 6.25% in the second quarter of 2020 from Q1, The Boulder Group reported. Cap rates for net lease office properties were unchanged at 7.00%, while industrial properties compressed by six bps to 6.99%.
The net lease brokerage’s Q2 report says that throughout the quarter, transaction velocity was greatly impacted by COVID-19 and the effects it had on business resulting from government-mandated shutdowns. Transaction volume in the first half of 2020 declined by more than 20% when compared to 2019 in the net lease sector.
In a recent national survey conducted by The Boulder Group, 80% of net lease participants expect cap rates to increase by the end of 2020; with 43% expecting an increase of up to 19 bps.
“As investors become more conservative, properties with investment grade rated tenants and minimal impact from COVID-19 are more in favor within the net lease sector,” the report states.
Simultaneously, the report also noted that the numbers of net lease properties on the market increased during Q2. Industrial in particular saw a 12.44% quarterly increase.
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