Net Lease Real Estate
As of the first quarter of 2021, the trailing 12-month U.S. single-tenant transaction volume totaled $59 billion, according to Real Capital Analytics (RCA). Since the peak in the first quarter of 2020, single-tenant volume has declined and is down 30%, or $25 billion, year-over-year as of the first quarter of 2021. The volume declines are most pronounced in retail and office, which were down 37% and 31%, respectively, while industrial was down 24%.
Some market participants have expressed the view that the aforementioned decline in volume is more supply driven versus demand driven, as the limited supply of high-quality assets has resulted in increased competition among investors. This is also reflected in cap rates, which are at record lows despite the recent increase in the 10-year Treasury yield. Over the past year, office and retail cap rates have increased modestly, while industrial rates compressed, pushing overall single-tenant cap rates down to an average of 6.10% as of the first quarter of 2021, according to RCA.
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Retail and office cap rates have remained flat or expanded, while industrial cap rates compressed.
After a peak in Q1 2020, single-tenant volume has declined over the past 12 months.