Net Lease Real Estate
As of the second quarter of 2021, the trailing 12-month U.S. single-tenant transaction volume totaled $65 billion, according to Real Capital Analytics (RCA). Since the trough in the third quarter of 2020, single-tenant volume has steadily increased and is starting to return to pre-pandemic levels.
Research from CBRE indicates that there have been several factors driving the increased volume of single-tenant transactions, including an uptick in activity in the office sector as people start returning to workplaces as well as robust institutional and foreign investment activity. Foreign investment volume accounted for 11.6% of total net lease volume in the first quarter of 2021, above the five-year first quarter average of 11.1%. Institutional and equity funds were the largest net lease buyers in the first quarter, with acquisition volumes up year-over-year, according to CBRE.
Overall, single-tenant cap rates have remained stable. In contrast, retail and office cap rates are above pre-pandemic levels, while industrial cap rates have continued to compress to below pre-pandemic levels, ending the quarter at 5.9%.
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Retail and office cap rates have remained flat or expanded, while industrial cap rates compressed.
Since Q3 2020, single-tenant volume has steadily increased.