Report: QSRs Outperform Other Net-Lease Retail Categories

Even as net lease retail inventory has expanded significantly, growing from $9 billion in 2022 to more than $24 billion today, quick-service restaurants have outperformed expectations and outpaced many other categories within the space, Northmarq says in a new report. “In fact, they are now some of the most sought-after assets for private investors, particularly those seeking reliable cash flow in an otherwise uncertain financial environment,” write Northmarq’s Bryn Feller, Isaiah Harf and Christian Tremblay.

Cap rates for QSR assets have remained relatively stable, hovering between 5% and 6%, even as cap rates for other retail segments have inched higher, Feller, Harf and Tremblay write. “This demonstrates the strong investor appetite for these properties.”

The Northmarq report cited key factors in the strong performance of QSR properties, including low price points that often put these properties “into the sweet spot for private investors with available cash.”
Reduced dependence on 1031 exchange investors is another factor, along with “very long lease terms
and reliable ease of ownership” and a lack of online competition. “You can’t get a fresh, hot burrito
delivered via Amazon, and that’s a major comfort for investors,” the report states.