U.S. Net-Lease Attracts Global Investors | H1 2017
Investor demand for U.S. net-lease product remains solid. H1 2017 volume was up 5% versus H1 2016. Sales growth in net-lease office and industrial is making up for a slight decline in net-lease retail.
Despite rising short-term interest rates, net-lease cap rates remain low, with a healthy spread over the 10-year Treasury. Divergence between net-lease and overall cap rates is most pronounced in the retail sector, where H1 saw cap rates for net-lease retail decline by 25 basis points (bps) while those for overall retail increased by 11 bps-39 bps (depending on the retail segment).
Although private investors accounted for the largest share of H1 2017 net-lease sales activity, cross-border investors accounted for the largest share of net acquisitions. All domestic investor groups were net sellers of net-lease assets in H1 2017, with the exception of REITs, which moved slightly into a net buyer position after major dispositions in 2016.
The outlook for the net-lease market remains cautiously optimistic, given healthy cap rate spreads and opportunities tied to sustained cross-border demand and a build-up of REIT capital.