The Boulder Group introduced the discharge of its Internet Lease Drug Retailer Report in the present day.
Within the third quarter, nationwide asking cap charges within the single tenant drug retailer sector elevated to six.39 p.c, based on the 2020 Internet Lease Market Report. This represented a 17 foundation level improve when in comparison with the prior yr.
Cap charges for Ceremony Assist and Walgreens properties skilled cap price will increase of 19 and 15 foundation points respectively. Nevertheless, single tenant CVS properties skilled a 10 foundation level lower.
“Throughout 2020, net lease investors focused on essential retailers and accordingly the drug store sector experienced a significant increase in transaction volume,” stated Randy Blankstein, President, The Boulder Group. “Transaction volume for single tenant drug stores increased by more than 30 percent in 2020.”
In response to the report, the principle issue for the rise in cap charges for the drug retailer sector was a shorter common remaining lease time period which dropped to 10 years within the third quarter.
“Throughout the pandemic the three main drug store tenants, CVS, Rite Aid and Walgreens did not ask for any rent relief or concessions,” provides Jimmy Goodman, Companion, The Boulder Group. “These tenants remained open due to their essential status and continued to pay rent on time.”
Regardless of the elevated demand for single tenant drug shops, this sector offered a level of value for its buyers. Within the third quarter of 2020, the web lease drug retailer sector was priced at a 33 foundation level low cost to the over internet lease retail sector. This was primarily attributed to the growing old provide of drug retailer properties with a shorter lease time period.
“The significant demand for drug store assets combined with the increased number of transactions has depleted the sector of quality assets,” John Feeney, Senior Vice President, The Boulder Group provides. “When compared to 2019, the overall supply of single tenant drug store properties decreased by approximately 10%.”
Moreover, the availability of long run leased properties has decreased as nicely. In 2019, leases with greater than 15 years remaining on their major time period made up roughly 25% of the market. In 2020, this section has decreased to roughly 15% of the market.
“Transaction velocity for the remainder of 2020 should continue to favor essential retailers with drug stores being a beneficiary of the increased demand,” based on Blankstein.
Personal and 1031 exchange buyers will proceed to be the first acquirers of single tenant drug shops as they search the secure cash flows this asset class gives.
With the present uncertainty all through internet lease sector, nearly all of buyers are targeted on internet lease drug shops with long term leases and first market places.
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