Net-Lease Drug Store Cap Rates Decline

Median asking capitalization rates shrunk for all major net-lease drug stores in 4Q12 as minimal supply continues to plague the sector, according to The Boulder Group’s Net Lease Drug Store Report.

Cap rates for Rite Aid compressed to 9 percent, a 20-basis-point drop from 2Q12. CVS experienced a 10 percent basis-point decline, compressing to 6.6 percent followed by Walgreens’ 5 basis-point fall to 6.4 percent.

Decline was the overarching theme in the net-lease drug store market last year as supply of these properties declined by 56 percent from 2Q12 through year-end. Newly constructed drug stores also experienced a 62 percent decline within that same period.

Although transaction volume has been high for recently developed Walgreens and CVS stores, historically low cap rates are expected to drive investors elsewhere in search of older assets with consistently healthy sales.

Download the complete report (PDF).