THE NET LEASE

MARKET REPORT
Q2 2015
NATIONAL ASKING CAP RATES

MARKET OVERVIEW

Cap rates in the second quarter of 2015 for the single tenant net
lease retail sector remained unchanged at their historic low rate of
6.40%. Cap rates for the office and industrial sector experienced
slight downward movement of 5 and 8 basis respectively. Despite
the Ten Year Treasury yield reaching its highest point of 2015
(2.47), investor demand has continued for this asset class. The
increased demand in the net lease sector has caused cap rates
to remain stable despite the increase in interest rates this quarter.

Q1 2015
(Previous)

Q2 2015
(Current)

Basis Point
Change

Retail

6.40%

6.40%

Office

7.35%

7.30%

-5

Industrial

7.70%

7.62%

-8

Sector

NUMBER OF PROPERTIES
ON THE MARKET

Owners of net lease product have released an increased supply

to the market in the second quarter of 2015 in attempt to take
advantage of the low cap rate environment. Overall supply of net
lease assets was up over 21% in the second quarter, with retail
assets leading all sectors at 23%. Even with an increased supply
and compressed cap rate levels, bidding for net lease assets
has been favorable to sellers. The median asking versus closed
cap rate spread for all three sectors (retail, office and industrial)
compressed slightly during this quarter.

Sector

Q1 2015
(Previous)

Q2 2015
(Current)

Percentage
Change

Retail

2,742

3,372

23.0%

Office

312

371

18.9%

Industrial

307

342

11.4%

As limited opportunities exist for new construction and long term

leased properties to investment grade tenants when compared to
the investor demand, these assets are commanding the highest
prices. Recently constructed Dollar General, PNC Bank and
OReilly Auto Parts properties experienced cap rate compression
of 12, 30 and 12 basis points respectively in the second quarter.
Furthermore, McDonalds ground leased assets continued to
achieve the lowest cap rate levels in the sector.
With investors carefully monitoring the capital markets for a
potential rise in interest rates, pricing for institutional assets ($10
million and greater) will react first as these investors are more
sensitive to interest rate fluctuations. Sellers will continue to seek
aggressive pricing for their assets as the bidding environment
remains competitive; however cap rates should remain near current
levels in the near term.

MEDIAN NATIONAL ASKING VS

CLOSED CAP RATE SPREAD

Q1 2015
(Previous)

Q2 2015
(Current)

Basis Point
Change

Retail

19

18

-1

Office

35

32

-3

Industrial

39

37

-2

Sector

www.bouldergroup.com

THE NET LEASE

MARKET REPORT
Q2 2015
SELECTED SINGLE TENANT SALES COMPARABLES
Sale
Date

Sector

Tenant

City

State

Price

Price
Per SF

Cap
Rate

Lease Term
Remaining

Apr-15

Retail

CVS

New Orleans

LA

$10,893,600

$801

5.48%

25

Apr-15

Retail

Walgreens

Oak Lawn

IL

$10,700,000

$735

5.28%

20

Apr-15

Retail

Walmart (GL)

Niles

IL

$9,685,000

--

4.89%

Apr-15

Retail

The Fresh Market

Creve Coeur

MO

$9,500,000

$370

5.30%

15

Apr-15

Industrial

FedEx Ground

Beaumont

TX

$9,078,000

$109

6.30%

10

Apr-15

Medical Office

Premier Surgery Center of Louisville

Louisville

KY

$8,000,000

$423

6.23%

13

Apr-15

Retail

Hobby Lobby

Jacksonville

NC

$7,900,000

$144

6.50%

15

May-15

Retail

CVS

Ware

MA

$7,790,000

$589

5.40%

19

May-15

Retail

Citibank

Alameda

CA

$6,000,000

$419

5.07%

10

Apr-15

Retail

Buca di Beppo

St. Paul

MN

$5,985,329

$504

7.00%

18

May-15

Retail

TD Bank (GL)

Winter Park

FL

$5,882,400

--

5.25%

19

Apr-15

Retail

Rite Aid

Marietta

GA

$5,350,000

$387

7.04%

May-15

Retail

Chase Bank (GL)

Phoenix

AZ

$5,300,000

--

4.30%

11

Apr-15

Retail

Rite Aid

Greenville

SC

$4,804,000

$347

6.75%

May-15

Retail

Walgreens

Independence

MO

$4,675,000

$259

6.50%

Apr-15

Retail

Kroger

Hendersonville

TN

$4,600,000

$78

6.72%

NET LEASE CAP RATE TRENDS

8.75%
8.25%
7.75%
7.25%
6.75%
6.25%
Q1 2007

Q1 2008

Q1 2009

Q1 2010

Q1 2011

Q1 2012

Q1 2013

Q1 2014
Retail

Office

Q1 2015
Industrial

www.bouldergroup.com

THE NET LEASE

MARKET REPORT
Q2 2015
MEDIAN ASKING CAP RATES BY YEAR BUILT
Tenant

2011-2015

2006-2010

2000-2005

Pre 2000

7-Eleven

5.00%

5.25%

5.75%

6.00%

Advance Auto Parts

6.00%

6.50%

7.06%

7.72%

AutoZone

5.25%

5.75%

5.95%

6.50%

Bank of America (GL)

4.00%

4.49%

4.80%

5.25%

Chase (GL)

4.00%

4.40%

N/A

4.75%

CVS

5.00%

5.55%

5.75%

7.00%

DaVita

5.60%

7.00%

7.50%

8.00%

Dollar General

6.38%

7.68%

8.15%

9.00%

Family Dollar

7.00%

8.00%

8.38%

8.91%

FedEx

6.25%

6.50%

7.80%

9.46%

Fresenius

6.00%

7.20%

7.85%

9.75%

GSA

7.38%

7.77%

8.10%

8.90%

McDonald's (GL)

3.80%

4.18%

4.40%

4.75%

O'Reilly Auto Parts

5.63%

5.73%

6.40%

7.00%

PNC (GL)

4.00%

4.50%

4.80%

5.10%

Rite Aid

6.00%

6.44%

6.89%

8.33%

Walgreens

5.00%

5.50%

5.78%

7.28%

N/A

4.35%

4.80%

5.00%

Wells Fargo (GL)

FOR MORE INFORMATION

AUTHOR
John Feeney | Vice President
john@bouldergroup.com

CONTRIBUTORS
Randy Blankstein | President

Jimmy Goodman | Partner

Zach Wright | Analyst

randy@bouldergroup.com

jimmy@bouldergroup.com

zach@bouldergroup.com

2015. The Boulder Group. Information herein has been obtained from databases owned and maintained by The Boulder Group as well as third party sources. We have not verified the information
and we make no guarantee, warranty or representation about it. This information is provided for general illustrative purposes and not for any specific recommendation or purpose nor under any
circumstances shall any of the above information be deemed legal advice or counsel. Reliance on this information is at the risk of the reader and The Boulder Group expressly disclaims any liability
arising from the use of such information. This information is designed exclusively for use by The Boulder Group clients and cannot be reproduced, retransmitted or distributed without the express
written consent of The Boulder Group.

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