The net lease sector remains one of the most cyclically durable segments of the commercial real estate market, but it has felt the impact of the coronavirus pandemic, according to Avison Young.
Activity slowed dramatically quarter-over-quarter, dropping from 586 deals in fourth quarter 2019 to 416 in first quarter 2020. This finding suggests depressed volume is caused not by a lack of investor confidence in the sector, but rather by coronavirus-related obstacles to transacting efficiently. Unavailability of debt, inability to inspect properties and difficulty negotiating in a fully remote work environment are chief among these obstacles.
The casual dining sector saw a decline of 21 basis points quarter to quarter, likely because the average remaining lease term increased significantly from 11.9 years to 14.2. Looking only at deals with 10 years or more term remaining, cap rates increased 13 basis points from 6.06 percent to 6.19 percent. The number of trades decreased
