NNN Lease Market News
The market for urban retail properties has witnessed a sharp
resurgence in the past couple months. In-fact, we are seeing cap rates and
prices that are reminiscent of the markets heyday back in 2005-2007. There is
such a strong demand for these properties that they are routinely receiving
multiple offers. This trend is being fueled by a number of factors such as
inherently strong real estate quality, low interest rates, and a surplus of
investors willing to deploy capital.
It is no secret that a great deal of the net lease market’s
recent success is due to the security it offers investors. Net lease properties
offer investors reliable income streams with little to no active management.
These qualities are only enhanced in the context of urban condos. Unlike
properties located in tertiary markets, urban retail can depend on higher foot
traffic and a greater intrinsic value. This serves to add an extra layer of
security to the investment – should a tenant leave it will not be hard to
replace them.
Investors know this and are actively seeking these
properties. Low interest rates coupled with a surplus of capital (that had
previously been sitting on the sidelines) have led to a perfect storm of rising
prices and falling cap rates. Likewise, many sellers are reluctant to sell
because they would face the same problem in redeploying their capital. As
demand continues to gain momentum it is likely investors will dig even deeper
for tenant and location, resulting in downward pressure on cap rates.
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