“Low interest rates, economic uncertainty and volatile equity markets will keep the single- tenant net-lease market one of the hottest CRE markets in 2012,” the report noted. “There is certainly a lot of money out there,” Randolph Mason, CCIM, SIOR and a partner with Commercial Realty Specialists, told Commercial Property Executive. “Depending on the tenant mix, (net leases) are absolutely a safe investment because of the lack of volatility.”
Cap
rates for the sector continue to compress. According to data firm Real Capital
Analytics Inc., average cap rates for single-tenant assets dropped from 7.7
percent at the beginning of 2011 to 7.5 by the third quarter. Comparatively,
the average cap rate in 2010 was 7.9 percent. The Boulder Group, a research
firm specializing in net-lease transactions, found a similar trend. A
fourth-quarter report by the firm found that “the national single-tenant
net-lease market transaction volume should remain active due to the stability
and financing availability of this asset class.” Additionally, a majority of
the firm’s clients are expecting 2012 transaction volume to increase between 5
and 14 percent from 2011 levels—with core assets from investment-grade tenants
remaining in the highest demand. www.cpexecutive.com
IMPORTANT
RECENT NET LEASES TRENDS
High
credit tenants such as McDonalds, Walgreens, Wal-Mart, CVS, and most national
banks have historically traded at lower cap rates and 2011 saw that trend
continue. The security of their leases routinely demands lower cap rates. This
is an important moderator on the net lease market. Though cap rates for lower
credit tenants may oscillate highly depending on the economic climate, high
credit tenants are usually assured a layer of protection. Though their cap
rates will change to reflect the market, they will be insulated by their
inherent security. Read full report here.
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