The private and 1031 investor continues to be the primary buyer of quick service restaurant (QSR) properties, according to the 2018 Net Lease QSR Market Report, published by Wilmette, Ill.-based The Boulder Group.
In the first half of 2018, private buyers accounted for more than 75 percent of QSR properties sold. This percentage is even higher (86 percent) if portfolio sales are excluded. As demand continues among the private buyer group, transactions continue to occur at a fast pace. In the first half of 2018, the number of QSR transactions outpaced the prior year by more than 10 percent and accounted for more than $1 billion.
Investors gravitate to the QSR market, as it offers lower price point properties that typically exhibit scheduled rental increases throughout the lease duration. Furthermore, the vast majority of QSR tenants provide transparency into store operations via store sales reporting or property-level profit and loss statements, which can be appealing to investors.
Cap rates in the net lease QSR sector declined to 5.5 percent in the second quarter of 2018, representing a 6 basis point decline when compared to the prior year. Cap rates for corporate leased QSR properties decreased by 11 basis points to a 5.24 percent cap rate, while QSR properties leased to franchisees declined by 4 basis points to a 5.71 percent cap rate.
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