The Boulder Group cites overall market conditions and increase in long term leased assets as the primary reason
WILMETTE, Ill., April 28, 2022 /PRNewswire-PRWeb/ -- The Boulder Group announced the release of its Net Lease Bank Ground Lease Report today. In the first quarter national asking cap rates in the single tenant bank ground lease sector decreased to 5.15%, according to the 2022 Net Lease Bank Ground Lease Report. This represented a 20 basis point increase when compared to the prior year.
"The cap rate compression associated with the banking sector can be best attributed to overall market conditions in the net lease sector combined with an increase in supply of longer leased properties," says Randy Blankstein, President, The Boulder Group.
Changing bank footprints and closings are a top concern for net lease investors interested in the net lease bank ground lease sector. According to S&P Global Market Intelligence data, almost 3,000 bank branch locations were closed net of openings in 2021.
"3,000 closings sounds significant, however it represents less than 5% of the bank branches in the United States," adds Jimmy Goodman, Partner, The Boulder Group. "That being said, as digital banking continues to grab a larger share of transactions, investors will remain steadfast in investing in strong locations with above average deposits."
Despite the contraction of physical bank branches, the supply of net lease bank properties increased. Furthermore, in the first quarter the median remaining lease term for bank ground leases exceeded 10.5 years.
"Investors acquiring banks have targeted the highest quality assets and competition has followed," John Feeney, Senior Vice President, The Boulder Group adds. "In the first quarter of 2022, the cap rate spread between asking and closed cap rates for net lease bank properties was 18 basis points."
Long term leases will attract the majority of the interest from 1031 and private capital buyers. However, short term leases with strong real estate and low rent levels will provide investors willing to take on more risk higher upside in the future.
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. "Cap rates in the banking sector will face upward pressure along with the overall net lease market as the Fed has forecast multiple rate hikes in 2022," according to Blankstein. "Bank branch deposits, in-place rental rates and real estate will be of primary concern for all investor classes."
To view the full report: https://bouldergroup.com/media/pdf/Net-Lease-Bank-Ground-Lease-Report.pdf
About The Boulder Group
The Boulder Group is a boutique, Chicago-based investment real estate services firm specializing in transaction and advisory services for single tenant net lease properties. Founded in 1997, the firm has closed over $6 billion of net lease property transactions. The firm provides a full range of brokerage, research, advisory, and financing services nationwide. The level of annual, single-tenant transaction volume consistently ranks the firm in the top 10 companies nationally, according to industry benchmarks determined by CoStar and Real Capital Analytics.
Media Contact
Randy Blankstein, The Boulder Group, 1 847-562-0003, [email protected]
SOURCE The Boulder Group
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