THE NET LEASE

MARKET REPORT
Q2 2016
NATIONAL ASKING CAP RATES

MARKET OVERVIEW

Cap rates in the first quarter of 2016 for the single tenant net lease
retail sector remained unchanged at their historic low rate of 6.18%.
During the same timeframe, cap rates for the office and industrial
sectors increased to 7.25% and 7.26% respectively. While cap
rates remained stable in the second quarter, an influx of net lease
assets entered the market this quarter increasing the total supply by
approximately 11%.

Q1 2016
(Previous)

Q2 2016
(Current)

Basis Point
Change

Retail

6.18%

6.18%

Office

7.20%

7.25%

+5

Industrial

7.10%

7.26%

+16

Sector

NUMBER OF PROPERTIES
ON THE MARKET

Sector

Q1 2016
(Previous)

Q2 2016
(Current)

Percentage
Change

Retail

3,029

3,310

+9.3%

Office

311

395

+27.0%

Industrial

294

346

+17.7%

MEDIAN NATIONAL ASKING VS

CLOSED CAP RATE SPREAD

Q1 2016
(Previous)

Q2 2016
(Current)

Basis Point
Change

Retail

24

26

+2

Office

21

30

+9

Industrial

37

28

-9

Sector

Cap rates for all major sectors remained unchanged or increased in

the second quarter. While the strong demand from 1031 and private
buyers kept retail cap rates firm, the volatility of the capital markets
were a contributing factor to the cap rate increases for the office and
industrial sectors. Historically, institutional capital is the traditional
buyer for single tenant office and industrial assets; however,
institutional investors are more sensitive to the volatility of the
financing markets in 2016 and have adjusted cap rates accordingly.
Throughout the course of the second quarter the 10 Year Treasury
Yield ranged from as high as 1.94 and as low as 1.45.
Despite cap rate stability in the second quarter of 2016, the spread
between asking and closed pricing increased for retail and office
properties by 2 and 9 basis points respectively. Owners of net
lease product have attempted to take advantage of the low cap
rate environment over the course of 2016 with aggressive pricing.
The widening of the spread between asking and closed cap rates
illustrates the cap rate pushback from buyers on the aggressively
priced assets. As a result, the marketing time for single tenant
properties has lengthened by approximately 11% when compared to
the prior quarter.
The net lease market is expected to remain active in 2016 investors
continue to seek safe and stable returns. The majority of net lease
participants expect cap rates to hold steady for the near term;
however the perception is that there is upward pressure on cap
rates. With the recent events in Europe and the subsequent drop in
the 10 year treasury, it is expected that volatility will increase for the
near term.

www.bouldergroup.com

THE NET LEASE

MARKET REPORT
Q2 2016
SELECTED SINGLE TENANT SALES COMPARABLES
Sale
Date

Sector

Tenant

City

Price
Per SF

Cap
Rate

Lease Term
Remaining

Apr-16

Industrial

FedEx

Louisville

KY

$41,893,000

$138

5.91%

15

May-16

Industrial

FedEx

Mabelvale

AR

$31,715,000

$102

6.79%

10

May-16

Industrial

Jo-Ann Stores

May-16

Industrial

PPG Industries

Visalia

CA

$27,921,000

$44

6.74%

10

Aurora

IL

$27,700,000

$91

5.40%

12

May-16

Retail

Mariano's

Elmhurst

IL

$25,000,000

$329

5.90%

17

May-16

Retail

CarMax

Nashville

TN

$24,500,000

$445

7.10%

Jun-16

Retail

Home Depot

Henderson

NV

$23,162,000

$226

6.04%

12

May-16

Retail

CVS

Watertown

MA

$15,800,000

$1,098

5.07%

25

Apr-16

Retail

Home Depot

Seabrook

NH

$15,047,000

$110

5.25%

15

May-16

Retail

Walmart Neighborhood Market

Mufreesboro

TN

$14,859,000

$345

5.17%

15

May-16

Retail

BJ's Wholesale Club

Easton

MD

$12,905,000

$205

6.35%

20

Jun-16

Retail

Walgreens

Towson

MD

$12,100,000

$979

5.66%

21

May-16

Retail

Walgreens

Chicago

IL

$11,275,000

$867

5.28%

15

Jun-16

Retail

Kohl's

Holland

MI

$7,875,000

$94

7.00%

10

May-16

Retail

Bank of America (GL)

Glenview

IL

$6,900,000

--

4.78%

13

Apr-16

Retail

Citibank

Park Ridge

IL

$5,126,000

$1,336

5.00%

10

Jun-16

Retail

Walgreens

Stockbridge

GA

$5,020,000

$332

7.17%

State

Price

NET LEASE CAP RATE TRENDS

8.65%
8.15%
7.65%
7.15%
6.65%
6.15%
Q1 2008

Q1 2009

Q1 2010

Q1 2011

Q1 2012

Q1 2013
Retail

www.bouldergroup.com

Q1 2014

Q1 2015

Office

Q1 2016

Industrial

THE NET LEASE

MARKET REPORT
Q2 2016
MEDIAN ASKING CAP RATES BY YEAR BUILT
Tenant

2011-2016

2006-2010

2000-2005

Pre 2000

7-Eleven

4.75%

5.50%

5.75%

6.65%

Advance Auto Parts

5.90%

6.75%

7.00%

7.50%

AutoZone

5.00%

5.50%

6.10%

N/A

Bank of America (GL)

4.20%

4.85%

5.10%

5.35%

Chase (GL)

4.35%

4.65%

4.90%

5.20%

CVS

5.00%

5.56%

6.25%

7.75%

DaVita

5.50%

6.63%

6.90%

8.25%

Dollar General

6.50%

7.38%

8.25%

9.09%

Family Dollar

6.28%

7.28%

8.00%

8.85%

FedEx

5.90%

6.65%

7.50%

9.85%

Fresenius

5.63%

6.65%

7.35%

8.20%

GSA

6.15%

6.70%

8.77%

N/A

McDonald's (GL)

4.05%

4.30%

4.70%

4.75%

O'Reilly Auto Parts

5.58%

6.00%

N/A

6.71%

PNC (GL)

4.60%

4.75%

5.01%

N/A

Rite Aid

6.00%

6.68%

7.50%

8.50%

Walgreens

5.20%

5.80%

6.00%

6.28%

FOR MORE INFORMATION

AUTHOR
John Feeney | Vice President
john@bouldergroup.com

CONTRIBUTORS
Randy Blankstein | President

Jimmy Goodman | Partner

Scott Harris | Analyst

randy@bouldergroup.com

jimmy@bouldergroup.com

scott@bouldergroup.com

2016. The Boulder Group. Information herein has been obtained from databases owned and maintained by The Boulder Group as well as third party sources. We have not verified the information
and we make no guarantee, warranty or representation about it. This information is provided for general illustrative purposes and not for any specific recommendation or purpose nor under any
circumstances shall any of the above information be deemed legal advice or counsel. Reliance on this information is at the risk of the reader and The Boulder Group expressly disclaims any liability
arising from the use of such information. This information is designed exclusively for use by The Boulder Group clients and cannot be reproduced, retransmitted or distributed without the express
written consent of The Boulder Group.

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