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Log In / Register | Apr 25, 2018

QSRs Still Looking Good to Net Lease Investors

Busy Burger KingQuick service restaurants tend to have leases that call for a 2 percent rent increase annually or a 10 percent increase every five years. That makes them look better to net lease investors than some premium drugstore tenants, such as CVS or Walgreens, which often have agreements that call for far less of an escalation, according to Matthew Berres, a senior vice president in the net lease group of JLL Capital Markets.

Cap rates in the retail sector, which includes QSRs, averaged 6.11 percent in the third quarter of 2017, a 12 basis point drop from the previous quarter.

Steady investor demand has kept restaurant net lease cap rates in the low range during 2017. In the casual dining net lease sector, quick service restaurants (QSRs) are winning, even if by a photo finish.

Cap rates in the sector averaged 6.11 percent in the third quarter of 2017, tightening by just 8 basis points from 6.19 percent in the first quarter of the year, according to research from Northbrook, Ill.-based net lease brokerage firm The Boulder Group. Within that range, plenty of differentiation was happening between franchisee-backed and corporate-backed net lease properties. Although franchisee-owned dining properties experienced plenty of demand from investors, corporate-owned restaurants came in with tighter overall cap rates on completed deals. — Donna Mitchell, National Real Estate Investor

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