THE NET LEASE

MARKET REPORT
Q3 2016
NATIONAL ASKING CAP RATES

MARKET OVERVIEW

Cap rates in the third quarter of 2016 for the single tenant net lease
retail sector reached a new historic low rate of 6.10%. During the
same period, cap rates for the office and industrial sectors decreased
to 7.08% and 7.14% respectively. The overall net lease market
remains active with 1031 and private investors due to the passive
nature of the leases and attractiveness of relative investment returns
when compared to other asset classes.

Q2 2016
(Previous)

Q3 2016
(Current)

Basis Point
Change

Retail

6.18%

6.10%

-8

Office

7.25%

7.08%

-17

Industrial

7.26%

7.14%

-12

Sector

NUMBER OF PROPERTIES
ON THE MARKET

Sector

Q2 2016
(Previous)

Q3 2016
(Current)

Percentage
Change

Retail

3,310

3,353

+1.3%

Office

395

408

+3.3%

Industrial

346

380

+9.8%

While newly constructed assets for certain tenants remain in high

demand and limited supply, the dollar store tenants continue to
expand and add an abundant supply of new construction to the
market. The dollar store sector remains to be one of the sectors with
increasing cap rates despite the current low cap rate environment
due to their large supply on the market. However, these assets
remain in demand with investors who have 1031 exchanges with
small equity requirements due to their low price points and long term
leases with creditworthy tenants.

MEDIAN NATIONAL ASKING VS

CLOSED CAP RATE SPREAD

Q2 2016
(Previous)

Q3 2016
(Current)

Basis Point
Change

Retail

26

26

Office

30

39

+9

Industrial

28

35

+7

Sector

The uncertainty of traditional investment asset classes coupled with

the stable yields generated by the single tenant sector has created
an abundance of investor demand for this sector. Despite a slight
rise in the supply of net lease properties, there is a lack of new
construction properties with long term leases. Accordingly, during the
third quarter cap rates for recently constructed properties tenanted
by McDonalds, DaVita and Advance Auto Parts compressed by 30,
25 and 15 basis points, respectively. This accounted for the greatest
retail tenant compression as noted in the cap rates by year built chart.

The net lease market should remain active throughout the remainder
of the year, with the expectation that cap rates should hold steady
for the near term. The market will remain favorable to sellers as
investors continue to seek this asset class due to the passive nature
of the leases and institutional and fund investors attempt to reach
fund allocations by years end.

www.bouldergroup.com

THE NET LEASE

MARKET REPORT
Q3 2016
SELECTED SINGLE TENANT SALES COMPARABLES
Sale
Date

Sector

Tenant

City

Price
Per SF

Cap
Rate

Lease Term
Remaining

Aug-16

Industrial

Home Depot

Tolleson

AZ

$48,000,000

$103

5.25%

14

Aug-16

Industrial

Golden State Foods

Brookfield

IL

$39,500,000

$267

6.60%

16

State

Price

Sep-16

Industrial

Famous Footwear

Lebanon

TN

$32,800,000

$60

6.71%

15

Sep-16

Office

Citrix Systems

Fort Lauderdale

FL

$23,900,000

$200

8.30%

10

Sep-16

Retail

BJ's Wholesale Club

Maple Shade

NJ

$15,600,000

$142

7.13%

Aug-16

Office

US Bank

Milwaukee

WI

$14,000,000

$126

6.13%

10

Jul-16

Retail

CVS

Miami

FL

$12,500,000

$1,383

4.82%

25

Jul-16

Retail

LA Fitness

Glendale

AZ

$12,500,000

$271

6.21%

14

Jul-16

Retail

Walmart Neighborhood Market

Richmond

VA

$12,091,000

$294

5.40%

15

Jul-16

Retail

Academy Sports

Diberville

MS

$11,395,000

$181

6.39%

15

Aug-16

Retail

Fresh Thyme Farmers Market

Worthington

OH

$10,670,000

$377

6.91%

14

Aug-16

Retail

CVS

Phoenix

AZ

$10,466,000

$844

5.65%

19

Sep-16

Retail

Wawa (GL)

Marlton

NJ

$7,020,000

--

4.46%

19

Aug-16

Retail

Walgreens

Raleigh

NC

$6,894,000

$505

5.40%

20

Aug-16

Retail

Walgreens

Ruston

LA

$6,500,000

$446

6.13%

16

Aug-16

Retail

Natural Grocers

Aurora

CA

$6,479,000

$429

6.20%

15

Jul-16

Retail

Walgreens

Columbia

SC

$5,772,160

$381

7.40%

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

Q1 2014
Retail

www.bouldergroup.com

Q1 2015
Office

Q1 2016
Industrial

THE NET LEASE

MARKET REPORT
Q3 2016
MEDIAN ASKING CAP RATES BY YEAR BUILT
Tenant

2011-2016

2006-2010

2000-2005

Pre 2000

7-Eleven

4.70%

5.25%

5.55%

6.25%

Advance Auto Parts

5.75%

6.75%

7.20%

7.60%

AutoZone

5.05%

5.60%

6.00%

N/A

Bank of America (GL)

4.40%

4.80%

5.15%

5.45%

Chase (GL)

4.30%

4.72%

4.90%

5.15%

CVS

5.00%

5.39%

5.85%

7.65%

DaVita

5.75%

6.43%

7.00%

8.15%

Dollar General

6.57%

7.51%

7.91%

8.61%

Family Dollar

6.40%

7.20%

7.85%

9.25%

FedEx

5.90%

6.50%

7.35%

N/A

Fresenius

5.70%

6.45%

7.15%

8.05%

GSA

6.10%

6.65%

N/A

N/A

McDonald's (GL)

3.75%

4.35%

4.90%

N/A

O'Reilly Auto Parts

5.50%

5.75%

5.95%

6.40%

Rite Aid

6.00%

6.90%

7.75%

8.70%

Walgreens

5.30%

5.85%

6.15%

6.75%

FOR MORE INFORMATION

AUTHOR
John Feeney | Vice President
john@bouldergroup.com

CONTRIBUTORS
Randy Blankstein | President

Jimmy Goodman | Partner

Asher Wenig | Vice President

Scott Harris | Analyst

randy@bouldergroup.com

jimmy@bouldergroup.com

asher@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
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www.bouldergroup.com