Retail Net Leased Cap Rates Plunge to Historic Lows

The cap rate for single tenant, net-leased retail properties in the USA plunged to a record low of 6.5 percent in the second quarter, as reported by Shopping Centers Today this month. Retail assets remain the most desired net-leased property type, as evidenced by the cap rate premium of 127-147 basis points compared to office and industrial sectors, respectively, according to the report.  The passive nature of net retail leases has generated historically higher demand and the largest spread compared to these other sectors in approximately 15 years, despite a 17.2% increase in retail net-lease offerings in the second quarter of 2014.  Expect private investors to continue to prefer these stable yields over potentially higher returns, at least for  the remainder of this year.