The Boulder Group’s Research Department has released a new research report providing comprehensive numbers and analysis of the 1st quarter activity in the National Net Lease Market.

1. www.bouldergroup.com
THE NET LEASE
MARKET REPORT
Q1 2016
Q4 2015 Q1 2016 Basis Point
Sector (Previous) (Current) Change
Retail 6.25% 6.18% -7
Office 7.00% 7.20% +20
Industrial 7.44% 7.10% -34
NUMBER OF PROPERTIES
ON THE MARKET
Q4 2015 Q1 2016 Percentage
Sector (Previous) (Current) Change
Retail 3,061 3,029 -1.0%
Office 322 311 -3.4%
Industrial 335 294 -12.2%
MEDIAN NATIONAL ASKING VS
CLOSED CAP RATE SPREAD
MARKET OVERVIEW
Cap rates in the first quarter of 2016 for the single tenant net lease
retail and industrial sectors reached a new historic low rate of 6.18%
and 7.10% respectively. During the same timeframe, cap rates for
the office sector increased by 20 basis points to a cap rate of 7.20%.
Cap rates for retail assets continue to decline and trade at much
lower cap rates than that of net lease office and industrial properties
due to their preference amongst private and 1031 buyers. Private
and 1031 investors typically pay lower cap rates than institutional
investors, especially for retail assets. Private and 1031 buyers are
more familiar with retail tenants, prefer the lower price points and
understand the general business practices of these tenants when
compared to industrial or office tenants.
As demand continues for the net lease sector, supply has continued
to remain constrained. Overall supply of the net lease sector
compressed by approximately 3% in the first quarter of 2016 when
compared to the previous quarter. New construction properties
remain in lower supply as the construction pipeline remains limited
when compared to previous years. New construction properties are
in the highest demand amongst 1031 and private buyers as they
typically have the longest lease term. Accordingly, cap rates for
recently constructed properties tenanted by AutoZone, DaVita and
Fresenius compressed by 40, 50 and 25 basis points respectively
in the first quarter. The limited supply has kept cap rates low for all
three sectors despite the volatility in the 10 year treasury over the
past year.
After the decision was made in the December Federal Reserve
meeting to raise key interest rates, the 10 Year Treasury plummeted
to its lowest point since February of 2015. Since that time, the 10
Year Treasury has trended upward, however remained lower than its
sudden increase prior to the Federal Reserve’s decision to increase
rates in December 2015.
The net lease market is expected to remain active in 2016 as investor
demand and allocated capital for this asset class remains strong.
With the volatility of the 10 Year Treasury effecting capital markets,
investors will be monitoring the capital markets and adjusting their
bids accordingly. 1031 and private investors will be less effected by
the volatility of the financing markets than institutional investors. This
can be attributed to their acceptance of lower returns when financing
or all cash closings due to their 1031 timing and tax consequences.
NATIONAL ASKING CAP RATES
Q4 2015 Q1 2016 Basis Point
Sector (Previous) (Current) Change
Retail 23 24 +1
Office 39 21 -18
Industrial 40 37 -3

2. www.bouldergroup.com
THE NET LEASE
MARKET REPORT
Q1 2016
SELECTED SINGLE TENANT SALES COMPARABLES
Sale
Date Sector Tenant City State Price
Price
Per SF
Cap
Rate
Lease Term
Remaining
Feb-16 Industrial Specialty Bakery Indianapolis IN $37,000,000 $164 7.52% 18
Jan-16 Office Toshiba Durham NC $35,800,000 $178 6.11% 12
Feb-16 Office Comcast Chelmsford MA $32,500,000 $247 7.35% 13
Feb-16 Industrial FedEx Menomonee Falls WI $19,900,000 $100 7.00% 15
Mar-16 Retail Lowe's Hermitage PA $14,043,000 $111 6.15% 10
Feb-16 Industrial FedEx Biddeford ME $12,400,000 $46 9.25% 5
Mar-16 Retail Lowe's Concord NC $10,500,000 $78 8.78% 3
Feb-16 Retail CVS Vernon NJ $9,750,000 $737 5.10% 25
Feb-16 Retail LA Fitness Chicago IL $9,500,000 $431 5.63% 14
Feb-16 Retail Walgreens Chicago IL $9,250,000 $638 5.35% 15
Feb-16 Retail Kohl's Eagan MN $9,176,000 $95 6.50% 9
Feb-16 Retail Walgreens Naples FL $9,100,000 $625 4.73% 20
Jan-16 Retail CVS Jupiter FL $7,264,000 $591 5.70% 7
Jan-16 Retail Hobby Lobby Hamilton OH $6,905,000 $125 6.13% 15
Mar-16 Retail Just Tires Lincolnwood IL $5,300,000 $847 5.87% 15
Mar-16 Retail Cumberland Farms (GL) Deerfield Beach FL $5,260,000 N/A 4.75% 20
Jan-16 Retail Chick-Fil-A (GL) Atlanta GA $4,750,000 N/A 4.00% 20
NET LEASE CAP RATE TRENDS
6.15%
6.65%
7.15%
7.65%
8.15%
8.65%
Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 20013 Q1 2014 Q1 2015 Q1 2016
Retail Office Industrial

3. www.bouldergroup.com
THE NET LEASE
MARKET REPORT
Q1 2016
FOR MORE INFORMATION
AUTHOR
John Feeney | Vice President
john@bouldergroup.com
Randy Blankstein | President
randy@bouldergroup.com
Jimmy Goodman | Partner
jimmy@bouldergroup.com
© 2016. The Boulder Group. Information herein has been obtained from databases owned and maintained by The Boulder Group as well as third party sources. We have not verified the information
and we make no guarantee, warranty or representation about it. This information is provided for general illustrative purposes and not for any specific recommendation or purpose nor under any
circumstances shall any of the above information be deemed legal advice or counsel. Reliance on this information is at the risk of the reader and The Boulder Group expressly disclaims any liability
arising from the use of such information. This information is designed exclusively for use by The Boulder Group clients and cannot be reproduced, retransmitted or distributed without the express
written consent of The Boulder Group.
Zach Wright | Senior Analyst
zach@bouldergroup.com
CONTRIBUTORS
Tenant 2011-2016 2006-2010 2000-2005 Pre 2000
7-Eleven 4.63% 5.25% 5.75% 6.75%
Advance Auto Parts 6.00% 6.50% 6.95% 7.58%
AutoZone 4.75% 5.50% 6.00% N/A
Bank of America (GL) 4.00% 4.50% 4.75% 5.25%
Chase (GL) 4.20% 4.50% 4.65% 5.20%
CVS 5.00% 5.63% 6.13% 7.47%
DaVita 5.50% 6.75% 6.88% 8.75%
Dollar General 6.40% 7.75% 8.00% 8.15%
Family Dollar 6.25% 7.35% 7.75% 9.01%
FedEx 5.75% 6.40% 7.50% 9.72%
Fresenius 5.75% 6.70% 7.64% 8.63%
GSA 5.75% 6.88% 8.54% N/A
McDonald's (GL) 3.88% 4.20% 4.58% 4.70%
O'Reilly Auto Parts 5.75% 5.87% N/A 7.00%
PNC (GL) 4.50% 4.60% 4.70% N/A
Rite Aid 5.75% 6.50% 6.75% 8.25%
Walgreens 5.15% 5.65% 6.00% 6.25%
MEDIAN ASKING CAP RATES BY YEAR BUILT
Scott Harris | Analyst
scott@bouldergroup.com