October 15, 2013 by The Commercial Real Estate Show
ATLANTA – Single tenant net lease properties are the perfect solution for investors who are interested in owning real estate without having the responsibilities of a landlord. While interest rates are low, many believe now is the perfect time for investors to snatch up these properties.
Those were a few of the points made during the most recent episode of the “Commercial Real Estate Show” radio program, hosted by Michael Bull of Bull Realty. Bull and his guests discussed sales velocity, what buyers look for and cap rates.
“Over the next 18 months, we anticipate $15 billion in new product hitting the market,” said Geoffrey Linden, vice president of acquisitions for Agree Realty Corp. Although supply isn’t as robust as it was in 2006, new, high-quality product coming online means single tenant net lease properties should continue to be a popular investment, he added.
Dollar stores, drug stores and quick service restaurants are among the most popular products for sale, and all three experienced an increase in sales velocity during the past 12 months, said Sheree Strome, vice president of the national net lease investment group at Bull Realty.
For dollar stores, velocity jumped 23 percent, she said. Drug stores climbed 10 percent and quick service restaurants increased by 40 percent. “Buyers like credit tenants, good locations, triple net leases and rent increases for quick service restaurants,” Strome added.
Cap rates have continued to fall, especially for triple net, 15-year leases, Strome said. Cap rates depend on a variety of factors, including the kind of tenant, lease terms, location and demographics. Auto parts stores tend to have cap rates between 6 and 7 percent, while drug stores are lower at 5 to 6 percent, she added. Dollar stores fall in the middle at around 6.5 to 7 percent.
With interest rates expected to rise, the effect on cap rates remains unknown. “We’ve all enjoyed historically low cap rates and while interest rates will creep up over the next year, I don’t really see cap rates following rapidly behind them,” said Karen Hutton, CEO of The Hutton Cos.
However, Linden stated the opposite. “In net lease, we have long-term leases with fixed rental rates so we aren’t able to monetize on the improving economy,” Linden said. “The only way to keep up with other investment classes will be for cap rates to rise as well.”
The entire episode on single tenant net lease investment properties is available for download at www.CREshow.com. The next “Commercial Real Estate Show” will be available on Oct. 10 and will examine the rebirth of the housing market.
About the “Commercial Real Estate Show”
The “Commercial Real Estate Show” is a nationally syndicated one-hour weekly talk radio show about commercial real estate-related topics in the U.S. New shows are broadcast weekly on 12 radio stations across the nation, on iTunes, on the Liberty Express and on the show website, www.CREshow.com.
The show host is 30-year commercial real estate veteran Michael Bull, CCIM. Michael is a writer, speaker, consultant and the founder of Bull Realty, a U.S. commercial real estate sales and consulting firm headquartered in Atlanta.
For more information, contact:
The Wilbert Group