THE NET LEASE MARKET REPORT

Q1 2011

NATIONAL ASKING CAP RATES MARKET OVERVIEW

Net lease cap rates compressed among retail, office and industrial
Sector Q4 2010 Q1 2011 Basis Point markets in the first quarter, while maintaining strong investment sales
(Previous) (Current) Change activity in the single tenant market. A primary factor behind the cap rate
Retail 8.00% 7.83% -17 compression was that activity was heavily focused on core offerings in
Office 8.10% 8.00% -10 primary metros despite the limited supply of assets with these
Industrial 8.44% 8.42% -2 characteristics. Secondary contributing factors driving the cap rate
compression included an improved CMBS market, continuation of low
interest rates and a lack of new development causing a limited supply.
NUMBER OF PROPERTIES ADDED TO
Net Lease supply was largely driven by a new round of motivated sellers
MARKET THIS QUARTER who emerged to capitalize on the recent increase in property values. Net
Sector Q4 2010 Q1 2011 Percent lease demand primarily came from investors continued pursuit of a
focused investment strategy heavily concentrated in the bank and drug
(Previous) (Current) Change
Retail store sectors and on more conservative investments such as ground
1,688 1,932 12.6%
leases. Industry insiders expected this quarter would be the start of
Office 318 432 26.4%
investors branching out from their limited focus on prime assets and
Industrial 240 268 10.4%
seek opportunistic yields in secondary markets and private credits.
However, with the exception of shorter term leases for investment grade
tenants, this has failed to materialize.
MEDIAN ASKING CAP RATES
BY PROPERTY TYPE The net lease market continues to improve, but there is still general
Property Q4 2010 Q1 2011 Basis Point uncertainty as the factors driving it appear to be short term in nature.
Type (Previous) (Current) Change Many investors believe that the cap rate compression is close to
Walgreens 7.00% 6.85% -15 reaching a plateau as an influx of product is being brought to market to
Ground Leases 6.90% 6.70% -20 take advantage of the improved pricing fundamentals. As the year
Restaurants 7.76% 7.75% -1 progresses, supply is expected to continue increasing as the new
Leaseholds 8.75% 8.01% -74 development market slowly improves.
Zero Cash Flow 7.51% 7.34% -17
Banks 6.75% 6.50% -25
CVS 7.29% 7.01% -28
Government-GSA 8.00% 7.95% -5
Dollar General 8.51% 8.38% -13
For more information regarding
Fedex 8.10% 8.07% The Net Lease Market Report, please contact:
-3
McDonalds 5.75% 5.70% -5 Randy Blankstein Jimmy Goodman
or
rblank@bouldergroup.com jimmy@bouldergroup.com

www.bouldergroup.com
 THE NET LEASE MARKET REPORT
Q1 2011

SELECTED SINGLE
TENANT SALES COMPARABLES
Sale Price Cap Lease
Date Sector Tenant City State Price Per SF Rate Term
January - 2011 Office The Hillman Group Cincinnati OH $16,500,000 $49 8.88% 10
January - 2011 Retail Lowe's (Ground Lease) Knoxville TN $10,012,172 $63 6.74% 15
January - 2011 Retail LA Fitness Arlington TX $7,750,000 $172 9.00% 11
January - 2011 Retail Dillons Lawrence KS $5,100,000 $93 7.76% 9
January - 2011 Retail CVS West Palm Beach FL $5,750,000 $383 7.59% 14
January - 2011 Retail CVS Fort Lauderdale FL $5,357,000 $362 7.34% 15
January - 2011 Retail CVS Cooper City FL $5,356,000 $362 7.10% 15
February - 2011 Retail Walgreens St. Paul MN $5,909,000 $408 6.75% 23
February - 2011 Retail Walgreens Cape Coral FL $5,155,000 $347 6.75% 25
February - 2011 Retail Walgreens Alpharetta GA $5,997,400 $412 7.30% 23

NET LEASED CAP RATE TRENDS

8.75%

8.35%

7.95%

7.55%

7.15%

Retail Office Industrial

6.75%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2004 2004 2004 2004 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011

© 2010. 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.

www.bouldergroup.com