In Q3 2023, net-lease investment volume showed a significant year-over-year decrease of 54%, totaling $8.5 billion. This drop was slightly higher than the 49% decrease in total commercial real estate investment volume.
Net-Lease Investment
Net-Lease Investment Volume Drops Sharply: A Closer Look at the Numbers
- In Q3 2023, net-lease investment volume showed a significant year-over-year decrease of 54%, totaling $8.5 billion. This drop was slightly higher than the 49% decrease in total commercial real estate investment volume.
- Over the year ending in Q3 2023, net-lease investment volume declined by 55% compared to the same period in 2022, totaling $43.6 billion. Meanwhile, total commercial real estate investment volume saw a 56% decrease during the same time frame.
- Within the net-lease sector, the share of industrial and logistics properties increased slightly, rising to 52% in Q3 2023 from 51% in Q3 2022. Retail properties also saw a bump in their share, going from 25% to 28%, while office properties saw a decline from 25% to 20%.
- The average net-lease cap rate experienced an increase of 60 basis points (bps), reaching 6.2% in Q3, compared to the previous year. This uptick was influenced by ongoing economic uncertainties, a rise in the 10-year Treasury yield, and expectations of prolonged higher interest rates. CBRE predicts that long-term interest rates and net-lease cap rates will begin stabilizing by mid-2024.
- In Q3, the 10-year Treasury yield averaged 4.4%, marking its highest quarterly average since 2007. Spreads between the average net-lease cap rate and the 10-year Treasury yield decreased from 213 bps to 187 bps year-over-year.
