2022 Net Lease Industrial Sales and Cap Rates

Where are these trends heading? The latest update from Northmarq.

Source: Stan Johnson Co. Research, Real Capital Analytics

Source: Northmarq, Real Capital Analytics

The past year has seen a noticeable slowdown in activity for the single-tenant net lease industrial sector. After an unprecedented fourth quarter 2021, continued strong momentum led to first quarter results that ranked it among the top three periods in history.

However, each quarter in 2022 saw declining totals driven by a combination of investor hesitancy and lack of supply, among other influences. Still, the market was able to report a total of $40.5 billion for the year, making it the second-strongest year in history by a healthy margin, but sales volume is likely to remain comparatively stunted for the next several quarters at least.

The current economic environment will undoubtedly influence industrial leasing, sales, and development momentum in the coming months, but there remain bright spots throughout the sector. Sale leasebacks continue to be creative solutions for business and property owners looking to inject capital into their organizations.

Supply chain issues in recent years have highlighted the importance of last-mile distribution space, bulk warehouses, and everything in between. Additionally, industrial outdoor storage facilities continue to garner interest from investors as an up-and-coming subset of the sector. While industrial has been the darling of the net lease market for several years, some investors turned their attention to other asset classes as cap rates compressed, falling to an average low of 5.15 percent at mid-year 2022. Now, with a sharp uptick of nearly 30 basis points in just the last three months, the average cap rate is approaching 5.50 percent, and a continued upward trend could grab the attention of investors seeking yield.

Lanie Beck is the Senior Director of Content & Marketing Research at Northmarq. She is responsible for leading the content strategy for the firm and producing research reports in support of the organization’s commercial investment sales division. Beck joined Northmarq in 2022 following the acquisition of Stan Johnson Company, where she had led corporate research, marketing and communications efforts since 2013.

—Posted on Mar. 29, 2023

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