Cap rates in the single tenant net lease retail sector remained unchanged (6.25 percent) in the fourth quarter of 2018 when compared to the prior quarter. Cap rates for the office and industrial sectors increased by 2 and 5 basis points respectively. As the Federal Reserve continues to implement its monetary policy, there is investor expectation that cap rates should trend upward in 2019.
The majority of property owners believe we are in the last stages of the current real estate cycle. Accordingly, property owners are supplying the current market with their non-core net lease holdings in order to take advantage of the historically low cap rate environment. In the fourth quarter of 2018, the net lease sector experienced an increase in supply of approximately 7 percent.
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Net Lease Investors Expect Rising Cap Rates in 2019