CAP Rates in Industrial Net Lease rise, Retail & Office still positive

Acquisition activity was huge in the fourth quarter for single tenant net lease properties, especially industrial net lease

Fourth quarter of 2013 ended up being a busy year for the single tenant net lease market proving the demand for such assets. With supply decreasing, CAP rates also declined to their lowest levels in the past ten years, resulting in cap rates of 6.85 and 7.40 percent with basis points drops of 17 and 30.

Cap Rates low in Net lease Retail and Office Markets

This is surprising for some investors, as one would think that even in the rise of interest rates that cap rates would rise too. “Almost everyone believes cap rates will be rising this year,” Randy Blankstein, president, The Boulder Group, told Commercial Property Executive. “That’s clearly the trend and a widely held belief in the marketplace.” This definitely has not been the case this year. The decline in cap rates has been a result of the constrained supply of net lease properties which was caused by the traditional year end buying frenzy and low interest rates, allowing owners to refinance rather then to sell.

Cap Rates up in Industrial Markets

In the industrial net lease properties sector, it was a different story in the fourth quarter. Cap rates went on a rise, increasing to

Industrial net lease

Industrial Net Lease Market, Cap Rates went on a rise

8.15 percent, 15 basis points. This could also be a potential sign that the retail and office net lease market could be on the rise very soon as well.

Deals are still being made

Even with the up and down with cap rates and supply, it still doesn’t stop investors from making acquisitions when the opportunities are there. American Realty Capital Properties Inc. this year made a $3.1 billion merger of American Realty Capital Trust along with 84 property single tenant net lease portfolio for $503 million.

The momentum will continue in 2014 and with attractive interest rates and the benefits of single tenant net lease properties investors will eagerly hunt for deals.

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Dwaine Clarke is a published author and founder of Clarke & Tinker Net Leased Property Group, a commercial real estate sales and advisory firm located in Connecticut. Connect with Dwaine on Twitter and Linkedin

About the Author

Dwaine L. Clarke is the Founder and President of GCT Net Lease. GCT Net Lease is an investment real estate services firm exclusively focusing on Single and Mult-Tenant Net Lease Properties. The firm provides a full range of brokerage and advisory services nationwide to High Net worth Investors, Developers, REITs and Institutional Investment Funds. GCT Net Lease is headquartered in Windsor Connecticut. Dwaine is also a nationally recognized speaker and consultant. He is also the author of three best selling commercial real estate investing books. Mr. Clarke’s experience branches through close to over a decade of working with and for some of the nation’s top investors to purchase, underwrite, develop and manage millions of dollars in commercial investment real estate. For his case, he has not only assisted these investors, but also became a student of theirs. Through careful analysis he started to understand what these investment experts were doing, using top strategies to buy, manage and sell their investment properties for maximum profit. He especially took note of how these investors were leveraging their time and how they made their decisions without interfering with their personal or business lives. Mr. Clarke is also active in investing and creating real estate partnerships, providing a vehicle for high net-worth individuals to own income producing real estate.

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