Cap Rates for Single Tenant Auto Properties Compress Français

WILMETTE, Ill., March 3, 2022 /PRNewswire-PRWeb/ -- The Boulder Group announced the release of its Net Lease Auto Report today. In the fourth quarter national asking cap rates in the single tenant auto sector decreased to 5.40%, according to the 202 Net Lease Auto Report. This represented a 49 basis point increase when compared to the prior year.

"The primary reason contributing to the decrease in cap rates was caused by overall market conditions in the net lease sector with increased demand," says Randy Blankstein, President, The Boulder Group.

According to the report, in comparison the net lease retail sector experienced cap rate compression resulting in a 12 basis point decline over the course of 2021.

"Supply in the net lease auto sector primarily consists of auto parts retailers," adds Jimmy Goodman, Partner, The Boulder Group. "In the fourth quarter, auto parts retailers made up 49% of the property supply."

Development and tenant expansion in this category lagged historical standards which lead to an average remaining lease term of less than 9 years for the auto parts sub-sector. Both the auto service and collision sub-sectors had average remaining lease term in excess of 12 years in the fourth quarter of 2021. The auto service sub-sector represents the lowest cap rates in the net lease auto sector.

"The supply chain constraints and chip shortages increased the length of car ownership, benefiting the auto parts and auto service sectors," John Feeney, Senior Vice President, The Boulder Group adds. "The current vehicle fleet in the United States continues to age, providing investors with further confidence in the auto parts and auto service sectors."

According to IHS Markit, the typical age of a vehicle on the road is more than 12 years old – representing an all-time high.

Transaction volume in the auto sector should remain similar to 2021 as investors continue to seek properties with strong tenants in the price range this sector provides. "Competition for new construction properties with long term leases will remain, especially amongst 1031 investors," according to Blankstein. "The net lease auto sector will garner investor interest ranging from private investors to institutional/REIT investors."

Media Contact

Randy Blankstein, The Boulder Group, +1 8475620003, [email protected]

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SOURCE The Boulder Group