Cap rates reach new all-time low

In the third quarter, cap rates in the single-tenant net-lease retail, office and industrial sectors reached a new all-time low, according to The Boulder Group in its Third Quarter Net Lease Research Report. When compared with the second quarter of 2020, cap rates compressed by 19, 10 and 11 basis points, respectively, for retail, office and industrial.

“Cap rate compression in the third quarter of 2020 can be primarily attributed to the recent announcement by the Federal Reserve which suggested interest rates will remain near zero at least through 2023,” said Randy Blankstein, president, The Boulder Group. “Combining this with a recent ‘flight to quality,’ there has been significant cap rate compression for strong credit and essential net leased assets.”

As COVID-19 continues to impact the real estate market, net-lease investors are limiting the type of properties they are willing to acquire. Sellers of retail assets that experienced the greatest