Cap Rates Continue Expanding in Q2 for Single-Tenant Retail, Industrial

Net lease cap rates have risen again in the second quarter of 2024, with average caps increasing by 12 basis points quarter-over-quarter to 6.27%, B+E reported. Also up are the average times on the sale market, which increased by 0.8 months during Q2.

B+E’s Q2 cap rate report found that retail cap rates have risen by an average of 12 bps, with some sectors such as casual dining and dollar stores increasing by 21bps from Q1. However, cap rates for quality tenants such as McDonald’s remain relatively stable. Industrial cap rates increased by an average of 15 bps, with FedEx properties rising 39 bps to an average of 6.87%.

“The rise of the 10-year U.S. Treasury continues to put upward pressure on cap rates as investors face higher borrowing costs,” according to the report. “The [Federal Reserve] continues to cite inflation, better-than-expected economic growth and a tight labor market as factors leaving rates unchanged.”