NewswireTODAY - /newswire/ - Northbrook, IL, United States, 2011/05/06 - Net lease cap rates compressed among retail, office and industrial markets in the first quarter, while maintaining strong investment sales activity in the single tenant market.

A primary factor behind the cap rate compression was that activity was heavily focused on core offerings in primary metros despite the limited supply of assets with these characteristics. Secondary contributing factors driving the cap rate compression included an improved CMBS market, continuation of low interest rates and a lack of new development causing a limited supply.

Net Lease supply was largely driven by a new round of motivated sellers who emerged to capitalize on the recent increase in property values. Net lease demand primarily came from investors continued pursuit of a focused investment strategy heavily concentrated in the bank and drug store sectors and on more conservative investments such as ground leases. Industry insiders expected this quarter would be the start of investors branching out from their limited focus on prime assets and seek opportunistic yields in secondary markets and private credits. However, with the exception of shorter term leases for investment grade tenants, this has failed to materialize.

The net lease market continues to improve, but there is still general uncertainty as the factors driving it appear to be short term in nature. Many investors believe that the cap rate compression is close to reaching a plateau as an influx of product is being brought to market to take advantage of the improved pricing fundamentals. As the year progresses, supply is expected to continue increasing as the new development market slowly improves.

About The Boulder Group

The Boulder Group (bouldergroup.com) is a boutique investment real estate service firm specializing in net lease properties. The firm provides a full range of brokerage, advisory, and financing services nationwide to a substantial and diversified client base, which includes high net worth individuals, developers, REITs, partnerships and institutional investment funds. Founded in 1997, the firm has participated in the acquisition and disposition of more than $1.2 billion of net lease real estate transactions through several real estate cycles. The Boulder Group is headquartered in suburban Chicago.

Agency / Source: The Boulder Group

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