2020 Net Lease Office Sales Volume & Cap Rates

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

Single-tenant office investments have been growing in popularity with net lease buyers in recent years, with annual investment sales activity exceeding $28.2 billion in 2019, which significantly outpaced the record set previously. Leading up to this banner year, the office market has had an incredibly strong showing, with nearly $120.0 billion in sales reported from 2015 to 2019, representing more than one-third of the total market’s activity during this time. Despite this positive momentum, we witnessed a drop-off in activity during early 2020 amid the health crisis. As investors pulled back and adopted a wait-and-see attitude, the net lease office market reported only $5.0 billion in sales during Q1 2020, which was the sector’s slowest quarter in 21 months. Average cap rates continued to compress, ending the quarter at 6.3 percent. As the trendline begins to flatten, dropping only two basis points since year-end, it is likely that we will see office cap rates officially bottom out sometime in 2020, although the impact from COVID-19 is still yet to be fully realized.

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 Jul. 22, 2020