Net-Lease Investment Volume Continues to Fall

Executive Summary

• Net-lease investment volume decreased by 54% year-over-year in Q2 to $9.4 billion. Total commercial real estate investment volume fell by 61% to $84.3 billion over the same period.
• For the year ending Q2 2023, net-lease investment volume fell by 50% from the previous year to $51.2 billion. Total commercial real estate investment volume decreased by 51% over the same period.
• The industrial & logistics share of total Q2 net-lease investment volume increased to 57% from 53% in Q2 2022, while the retail share decreased to 21% from 25%. The office share was unchanged at 22%.
• The average net-lease cap rate increased to 6.1% in Q2 from 5.7% a year ago. High interest rates, tight credit conditions and economic uncertainty continued to put upward pressure on cap rates. CBRE expects net-lease cap rates will begin to stabilize in the second half of the year as a clearer interest rate outlook emerges.
• The U.S. 10-year Treasury yield averaged 3.8% in Q2, its highest level since 2010. Spreads between the average net-lease cap rate and the 10-year Treasury rate decreased to 232 basis points (bps) from 251 bps year-over-year.
• Net-lease investment activity may continue to slow this year but, given its relatively low-risk nature, should stabilize more quickly than the broader market once more clarity emerges on the path of interest rates.