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:
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!
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.