Office & Industrial Report

The single tenant Office/Industrial market is highly competitive today, however, this competitiveness varies due to the nature of the tenant and the relevant market. High credit tenants in primary – especially urban – markets are among the highest in demand. According to Costar the market for single tenant NNN investments is averaging 10,000 transactions a quarter.
A majority of those were Retail spaces, Corporate and Regional HQ’s in Primary and Secondary Markets. Of these primary markets, none is more interesting than Washington DC. Many Investors and Corporations have excess cash holdings and seek less volatile investments than the open stock and bond markets.

This trend has been realized through the increased activity of Institutional Investors, Private Equity Groups, and both publicly and privately traded REIT’s D.C. is particularly fascinating with the inclusion of Government and Government Contracting Tenants such as SAIC, Booz Allen, Lockheed Martin, Northrop Grumman, etc.

Generally considered some of the most desirable tenants in terms of longevity and credit, Contractors are frequently subject to shorter leases (5-7yr periods depending on the time frame of their contract), but they also tend to renew due to the nature of the space amenities they often require. Government (Federal or State) tenants are typically a highly favored tenant as well.

Investors however must be comfortable with a “non appropriation of funds” clause which the government entity may exercise because of budgetary constraints. The DC metro, particularly Northern Virginia, has many prospects for advancement, such as: » Several New Developments in the Ballston/Rosslyn corridor through Arlington (attracting tenants into new facilities who seek proximity to DC).» Phase I Dulles Metro Rail expansion scheduled to be in operation in 2013 should help the Dulles/Tech Corridor and Tyson’s Corner. » BRAC’s (Base Realignment and Closure) southward shift along the I-395/I-95 corridor south to Stafford and Fredericksburg.

It is anticipated that these shifts will draw strong investment grade tenants into these areas in the form of regional headquarters, manufacturing facilities, single tenant satellite operations and those who need proximity to either the tech or DOD (Department of Defense) base. Each of these developments should be considered as having quality single tenant investment opportunities in the coming 12-18 months.

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Net Lease Market Report

Net Lease Market News


Calkain Net Lease Market Report provides in-depth analysis of the net lease market

A recent theme in the net lease mar­ket has been the success of primary markets compared to their tertiary counterparts. While primary markets have been resilient and recently showed remarkable success, tertiary markets con­tinue to struggle. The Washington DC area (D.C., Maryland and Virginia) is chief among the top tier markets and its rela­tive success is easily measurable.

Net lease cap rates for retail, market compressed in the first quarter of 2011, while investment sales remained strong in the single tenant market,according to data from Calkain. Calkain Research provides in-depth analysis of the net lease market. Our intimate knowledge and years of experience in the net lease industry gives us the unique opportunity to provide thought leadership and perspective.Through highly focused coverage over a diverse range of topics, we facilitate a culture of knowledge and enable intelligent investment strategies.

The net lease market continues to improve, but many of the factors driving this appear short term. As more properties come to market due to improved pricing fundamentals, many believe that the cap rate compression will plateau. The high demand and scarcity of high performance markets will continue drive their cap rates lower.
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