Cap Rates Increase For Big-Box Stores

Single-tenant net lease big box store cap rates increased 25 basis points last year to 6.75 percent, reported Boulder Group, Northbrook, Ill.

Boulder Group Vice President John Feeney attributed the cap rate increase to investor concern about “evolving” square footage demands for big box retailers. “For example, Kohl’s announced that they were decreasing the footprint of their stores and would plan on bolstering their digital offerings,” he said.

Feeney said as investor concerns about big box properties linger, tenant credit plays a growing role in investor demand. For example, big box properties leased to investment-grade tenants priced at a 33 basis point premium over non-investment-grade properties, he noted. “This spread more than doubled from the prior year,” he said, noting investment-grade big box properties accounted for just one-quarter of the total supply in late 2017.

Read more at MBA Newslink.