According to a report from The Boulder Group, cap rates in the single-tenant net lease sector continued to increase for the 11th consecutive quarter across all three sectors in the fourth quarter of 2024. Retail cap rates rose by two basis points to 6.52%, office cap rates increased by three bps to 7.78%, and industrial cap rates saw an eight bp increase at 7.23%.
President of The Boulder Group, Randy Blankstein, stated that high interest rates and comments from the Federal Reserve have had a negative impact on the market, resulting in an overall rise of cap rates to 6.76% (a three-bp increase from last quarter).
Although transaction velocity remained lower than its peak in early-2021, there was an uptick in investor activity during Q4 of this year. Additionally, there has been a decrease or stabilization between asking and closed cap rate spreads for net lease properties.
Partner at The Boulder Group Jimmy Goodman noted that this indicates buyer and seller expectations are gradually aligning after experiencing discrepancies earlier this year.
The report also predicts that if transaction velocity continues at its current pace, there will be a decrease in supply backlog for net leased assets.