The Net Lease Retail Market is Showing a Shift, with Higher Cap Rates and More Listings

Retail Investors continue to search for value-add opportunities composed with a tenant mix of e-commerce resistant and experiential tenants including such uses as medical, fitness, restaurants, grocery, entertainment and convenience. The Net Lease Market remains very strong despite headlines, although the average cap rate is up 10 basis points; many factors go into that (lease term, location of property, tenant credit, size of asset, etc.). Investor’s remains confident and the recent increase should not be overlooked, over the course of the past 3 years net lease cap rates have had little fluctuation at approx. 6.10% to 6.25%.

Over the course of the next 6 months, I believe the markets will continue to stay the course and investors will gravitate more towards core A markets. Assets in secondary and tertiary B and C class markets will trade but just at wider spreads. The number of properties listed nationally increased the 2Q 2018 as sellers look to sell assets now in order to take advantage of peak pricing before cap rates increase further. Only time will tell as to how much cap rate rise before the end of 2019!

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