In the third quarter, there was a decline in single-tenant net lease sales as reported by Northmarq. This decrease also resulted in an increase in cap rates, according to The Boulder Group.
According to Lanie Beck, senior director of content and marketing research at Northmarq, the investment sales volume for single-tenant office properties during Q3 2023 was $1.78 billion which is a 31% drop from Q2. Additionally, the investment sales volume for single-tenant industrial properties decreased by 23.5% from last quarter and over 51% year over year with a total of $4.5 billion.
However, there is some positive news within the net lease investment sector specifically with single-tenant retail properties which saw an increase of 51.4% in investment sales volume during Q3 and has remained consistent throughout this year compared to historical averages as stated by Beck.
The Boulder Group also reported that cap rates for single-tenant net lease properties have been increasing consistently for six consecutive quarters now reaching up to 6/51%. In terms of sectors within this market segment; retail had an increase of +10 bps bringing it up to %6/27%, office increased +14 bps bringing it up o %7/41%, while industrial increased +16 bps making it reach %6/96%.
President Randy Blankstein at The Boulder Group commented on these findings stating that “the primary driver behind these rising cap rates continues be due interest rate increases”. He further explained how throughout this third quarter period alone we saw peaks such as treasury peaking at almost four percent higher than its lowest point earlier on during same time frame (which was only three months ago).
