National Net-Leased Report | 2017 Outlook

The outlook for 2017 remains strong. Restaurants are still hanging on to some of the lowest cap rates across the net-leased sector, which bodes well for existing investors’ values. One would think that these low returns would deter buyers, but with all of the exchange capital floating around and the stability of restaurant net-leased investments, buyers still view these long-term investments as a hedge against inflation.

Check out the cap rate comparison graph below showing the most recent cap rate ranges by both sector and major brand:

Cap Rate Comparison Across Sectors

Overall, positive economic momentum has carried into 2017 and it is being driven by confident consumers. Although rising interest rates have sparked a slight investor re-calibration, there still seems to be some runway left in this market. The spread between cap rates and the 10-year treasury is maintaining a steady gap and although we would anticipate interest rates to go up at some point, they appear somewhat stable for now.

Net-leased properties recorded a 23.9 percent advance in the average asking rent last year, which has more than doubled the pace of multi-tenant shopping centers over the same period. A lot of this is due to strong corporate backed tenants or franchisees getting aggressive to secure additional sites and locations. The good news is that asking rents in net-leased properties are still below the pre-crisis peak with an average tenant paying $19.62 per square foot nationwide.

For 2017, store openings will be led by the dollar-store segment, however consistent expansion in the fast-food sector will continue over the comping year. From all angles, I see this year shaping up to be a busy one across the entire net-leased sector!

Access the Full Report Here

If you would like more specialized insight or research in regard to your current investment portfolio or more information around what restaurant net-leased investments are currently available on the market, feel free to contact me directly at 813-387-4796.

Published by James Thomas Garner

At Marcus & Millichap, James is dedicated to helping investors and principals in the disposition and acquisition of commercial retail properties. Medefind Retail specializes in multi-tenant and single-tenant retail properties, while Mr. Garner specializes specifically in the restaurant net-leased sector. Always a student of the business, James strives to be a leader in industry knowledge and an expert in restaurant net-leased properties. Prior to his focus on single-tenant net-leased food service assets, James had a focus on multi-tenant shopping centers across Florida markets. Mr. Garner's philosophy is in relationships; he believes in Win-Win scenarios. For that reason, James consistently acts as a true advisor to all clients and owners of retail properties. Even if there is no immediate business to be had, James goes above and beyond to offer an unbiased perspective on your investment situation to help you execute on an investment strategy in any capacity that makes sense for you. James is passionate, persistent, and strives to inspire his clients to make critical long term investment choices. As an integral part of Medefind Retail, James aims to integrate a culture that encourages entrepreneurship and innovation allowing for both personal and professional growth for his entire team, which translates to harder work and higher net proceeds for his clients.

Leave a Reply

%d bloggers like this: