2019 Net Lease Office Sales Volume and Cap Rates

Single-tenant office sales volume versus average cap rates, updated quarterly.
Source: Stan Johnson Co. Research, Real Capital Analytics

The single-tenant net lease office sector has reported four consecutive years of very steady, strong demand. And the $5.2 billion in sales reported during first quarter 2019 puts the market on track to realistically meet last year’s $22.8 billion. While demand levels seen late last year weren’t expected to carry over to 2019, it is clear that investors are still very interested in non-retail product in today’s market–and they’re not afraid to pay for it either. Multiple single-asset transactions closed in first quarter with price tags greater than $100 million, with the vast majority of activity occurring in the West region. It remains to be seen if this momentum will carry over to second quarter, but it’s likely that average transaction sizes will return to more normal levels, thereby resulting in lower quarterly sales totals. Average office cap rates have yet to bottom out though. Another two-basis-point drop during first quarter put the sector’s average at 6.3 percent, and with interest rates still low, it is possible that sustained increases won’t occur until 2020.

Focusing on business development, industry and client-specific research, and the analysis of local and national market trends, Lanie Beck has been the Director of Research for Stan Johnson Co. since 2013.

—Posted on July 24, 2019