For the fifth consecutive quarter, demand for single-tenant web lease property slowed within the first quarter of 2023, with simply $9.68 billion in gross sales. That complete was down 42.2% from the prior quarter and down 62.6% in comparison with Q1 2022, based on Northmarq’s Q1 2023 Market Snapshot report.
Consultants had anticipated the stoop due to rising rates of interest and altering financial circumstances. It adopted a interval of sturdy gross sales exercise, particularly towards the tip of 2021.
“Consumers and sellers proceed to battle discovering alignment with pricing web lease belongings, as increased debt prices translate to decreased shopping for energy for some buyers,” Northmarq acknowledged.
The end result has been that some patrons and sellers have provide you with work-around options when possible. This consists of turning to all-cash transactions, 1031 exchanges, and sale-leaseback preparations. There has additionally been a return of international capital to the market, particularly for single-tenant and retail belongings.
The report discovered that cap charges rose throughout all three main industrial property sectors: industrial, workplace, and retail. Single-tenant industrial cap charges reached a median of 5.5% — the best in 18 months, following an 11-basis-point bounce in Q1 2023. Workplace cap charges rose six foundation factors within the quarter. Nevertheless, there was solely a two basis-point enhance for retail throughout the identical interval.
“Look ahead to single-tenant cap charges to proceed rising all through 2023,” the report cautioned, “however don’t anticipate vital quarterly spikes within the total web lease common.”
