THE NET LEASE

BIG BOX REPORT

FEBRUARY 2015
BIG BOX ASKING CAP RATE COMPARISON

Q4 2013
(Previous)

Q4 2014
(Current)

Basis Point
Change

7.10%

6.71%

-39

BIG BOX VS. NET LEASE SECTOR

MEDIAN ASKING CAP RATE

Sector

Q4 2013
(Previous)

Q4 2014
(Current)

Big Box

7.10%

6.71%

Retail Net Lease Market

6.85%

6.50%

Big Box Discount (bps)

25

21

BIG BOX PROPERTIES MEDIAN

ASKING PRICE

Average
Price

Average Price
Per SF

Investment Grade

$6,519,479

$189

Non-Investment Grade

$6,232,500

$139

Sector

BIG BOX MEDIAN ASKING CAP RATE

BY CREDIT RATING

Investment Grade
Cap Rate

Non-Investment Grade
Cap Rate

Basis Point
Spread

6.00%

7.00%

100

MARKET OVERVIEW
Cap rates in the single tenant net leased big box sector compressed
from the fourth quarter of 2013 to the fourth quarter of 2014 by 39
basis points. The compression experienced by the big box sector
was greater than the overall net lease retail sector, which decreased
35 basis points over the same time period. With net lease retail cap
rates at their historic low levels, investors have been able to achieve
higher yields in the net lease big box sector as net lease big box
properties were priced at a 21 basis point discount to the entire net
lease retail market in the fourth quarter of 2014. The primary reason
for the cap rate discount available in the big box sector can be
attributed to the re-leasing risk associated with the square footage
of the properties and the significantly higher absolute price point
when compared to the net lease retail market. Net lease big box
transaction velocity was down 47% in 2014 when compared to 2013
primarily due to a lack of new free standing construction as tenants
such as Hobby Lobby, Ross and T.J.Maxx have been able to backfill
second generation or inline space at low rents.
Big box properties tenanted by investment grade companies remain
at the forefront of investor demand. However, the entire big box
sector was made up of only 43% investment grade tenants in the
fourth quarter of 2014. Big box properties tenanted by investment
grade companies commanded a 100 basis point premium versus
non-investment grade companies. However with retail cap rates at
historic lows, some investors have looked to acquire higher yielding
non-investment grade properties to boost portfolio returns. In 2013,
big box transactions were dominated by REITs which accounted for
69% of all sales. In 2014, there was a shift in buyer type within
the big box sector. Private buyers accounted 47% of the big box
transaction that occurred in 2014 according to Real Capital Analytics,
a 104% increase when compared to 2013. Private buyers continue
to dominate the net lease market in the low cap rate environment as
institutions cannot typically pay the cap rate premiums due to yield
restrictions.
The single tenant net leased big box sector will remain active as
both individual and institutional investors seek net leased properties
with higher yields. However, with low availability of net lease big box
properties market participant expectations are for cap rates to hold
steady or decline slightly in 2015.

www.bouldergroup.com

THE NET LEASE

BIG BOX REPORT
FEBRUARY 2015
MEDIAN ASKING CAP RATES
BY SQUARE FOOTAGE

MEDIAN ASKING CAP RATE BY

LEASE TERM REMAINING

SF Range

Cap Rate

Percentage
of Market

Years
Remaining

Investment
Grade

Non-Investment
Grade

Junior Big Box

20,000 - 40,000

6.78%

40%

16-20

5.33%

6.40%

Mid Box

40,000 - 80,000

6.72%

45%

11-15

5.77%

6.57%

15%

6-10

5.90%

7.02%

5 & Under

7.32%

8.03%

Sector

Large Format

Over 80,000

6.48%

BIG BOX MEDIAN ASKING CAP RATE BY REGION

5.75%
7.12%
6.63%

T
S
EA
H
T
R
NO

WEST
MOUNTAIN

MIDWEST

SOUTH
6.55%
6.70%

www.bouldergroup.com

THE NET LEASE

BIG BOX REPORT
FEBRUARY 2015
SELECTED SINGLE TENANT BIG BOX CLOSED TRANSACTIONS IN 2014
Sale Date

Tenant

City

State

Price

Price/SF

Cap Rate

Lease Term Remaining

Oct-14

Bass Pro Shops

Dania

FL

$28,130,000

$170

6.25%

Oct-14

Lowe's

Shippensburg

PA

$24,366,667

$142

6.05%

16

Oct-14

Gander Mountain

Waukesha

WI

$18,275,353

$294

8.35%

Sep-14

Lowe's (GL)

Silverdale

WA

$13,800,000

N/A

4.85%

14

Oct-14

LA Fitness

Goodyear

AZ

$12,000,000

$282

6.80%

15

Nov-14

Petco

Denver

CO

$11,350,000

$492

6.20%

10

Nov-14

LA Fitness

Redlands

CA

$9,150,000

$223

8.00%

Oct-14

Garden Ridge

Hilliard

OH

$7,150,000

$55

8.56%

Oct-14

Lowe's

Columbus

OH

$6,411,500

$51

8.50%

Oct-14

Bed Bath & Beyond

Mishawaka

IN

$5,700,000

$150

7.70%

COMPANY COMPARISON
Tenant
24 Hour Fitness
Academy Sports
Bed Bath & Beyond
Best Buy
BJ's Wholesale
Dick's Sporting Goods
Gander Mountain
Hobby Lobby
Kmart
Kohl's
Kroger
La Fitness
Lowe's
Petco
Ross
Shopko
Sports Authority
Sprouts Farmers Market
Staples
The Home Depot
Wal-Mart
Whole Foods

Total Number
of Stores

Credit
Rating

Market
Cap

400+
180+
1,000+
1,055
200
558
152
572
1,077
1,158
2,424
600+
1,750
1,300
1,173
332
460+
150+
2,000+
2,248
11,00+
387

B
Not Rated
ABB
BNot Rated
Not Rated
Not Rated
CCC+
BBB
BBB
Not Rated
AB
ANot Rated
BBBBBBA
AA
BBB-

Private
Private
$13 B
$12 B
Private
$6 B
Private
Private
$3 B
$12 B
$32 B
Private
$66 B
Private
$19 B
Private
Private
$5 B
$11 B
$137 B
$280 B
$18 B

FOR MORE INFORMATION

AUTHOR
John Feeney | Vice President
john@bouldergroup.com

CONTRIBUTORS
Randy Blankstein | President
randy@bouldergroup.com
Jimmy Goodman | Partner
jimmy@bouldergroup.com
Jordan Kaufman | Vice President
jordan@bouldergroup.com
Zach Wright | Research Analyst
zach@bouldergroup.com

2015. The Boulder Group. Information herein has been obtained from databases owned and maintained by The Boulder Group as well as third party sources. We have not verified the information
and we make no guarantee, warranty or representation about it. This information is provided for general illustrative purposes and not for any specific recommendation or purpose nor under any
circumstances shall any of the above information be deemed legal advice or counsel. Reliance on this information is at the risk of the reader and The Boulder Group expressly disclaims any liability
arising from the use of such information. This information is designed exclusively for use by The Boulder Group clients and cannot be reproduced, retransmitted or distributed without the express
written consent of The Boulder Group.

www.bouldergroup.com