Net Lease Market Report Q4 2024
Executive Summary
The net lease market in Q4 2024 experienced continued pressure from high interest rates, with cap rates marking the 11th consecutive quarter of increases across all three major sectors—retail, office, and industrial. The overall average market cap rate increased by 3 basis points to 6.76%. Despite the sustained upward trend, investor activity picked up in the fourth quarter, especially in industrial and retail sub-sectors, signaling a potential shift in market conditions as buyer and seller expectations align.
Key Market Trends
Cap Rates
The cap rates table illustrates minor yet notable variations across retail, office, and industrial sectors in Q4 2024. These shifts highlight the differing levels of investor sentiment and market stability within each sector.
Supply
This supply table showcases the changes in property availability for retail, office, and industrial sectors as of Q4 2024. The data reflects sector-specific dynamics, with varying trends indicating shifts in market supply and investor demand.
Forecast for Q1 2025
As the net lease market moves into Q1 2025, trends from the previous quarter are likely to influence the trajectory of cap rates and supply dynamics across various sectors. Here’s what to anticipate:
- Retail: Stability may continue in the retail sector with cap rates showing minimal changes. This sector could benefit from steady consumer spending and the gradual adaptation of retail spaces to new market demands, supporting a balanced investment climate.
- Office: The office sector might see sustained cap rate pressures but with a potential for stabilization if the demand aligns with the reduced supply. Ongoing adjustments to hybrid work models and office space utilization will be key factors influencing investor sentiment.
- Industrial: Expect robust activity in the industrial sector, driven by strong demand for logistics and distribution properties. The sector’s increasing cap rates and supply in Q4 2024 suggest continued investor interest and growth, likely resulting in further cap rate escalations and supply expansions.
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