According to a recent report from The Boulder Group, cap rates in the net lease sector saw a slight increase in the third quarter of 2024. The overall rise was three basis points compared to the previous quarter, with an average cap rate of 6.73%.
The Q3 report from The Boulder Group revealed that all property types experienced an uptick in cap rates. Office sector net lease properties had the largest increase at eight basis points, followed by industrial properties at five bps and retail properties at three bps.
This rise in cap rates coincided with the Federal Reserve’s decision to raise interest rates during this time period. Additionally, there has been limited transaction activity for both private and institutional buyers resulting in a stagnant supply of net lease properties on the market.
President Randy Blankstein stated that current sellers are hoping for increased transaction velocity and potentially better pricing due to recent cuts made by federal funds rate (50-bp cut). However, most market participants remain cautious and do not anticipate significant compression of cap rates unless there are further rate cuts.
