Price caps for single-tenant casual restaurants
The Boulder Group today announced the release of its Net Lease Casual Dining Report. In the first quarter, national asking cap rates in the single-tenant casual dining sector decreased to 6.03%, according to the 2022 Net Lease Casual Dining Report. This represents a decrease of 70 basis points compared to the previous year.
Casual restaurants with company-guaranteed leases generated cap rates of 5.75%, while franchise-leased properties had cap rates of 6.40%. Corporate secured lease cap rates were compressed by 40 basis points, while properties leased by franchisees fell by 72 basis points
“The compression of cap rates in the casual dining space has been primarily attributed to better general market conditions for the restaurant industry post-pandemic,” said Randy Blankstein, president of The Boulder Group. “Investor interest and transaction speed have increased due to the recovery of casual dining restaurants post-pandemic.”
Casual dining sales are up more than 30% in 2021 compared to 2020 according to Technomic’s Top 500. While sales have rebounded for the entire industry, only 30% of casual dining brands exceeded in-store sales in 2019. Strong corporate brands including Olive Garden and Texas Roadhouse have followed the pandemic with major expansion plans.
“At the height of the pandemic, investors were concerned that the decrease in in-person dining would have a dramatic impact on store sales,” adds Jimmy Goodman, Partner, The Boulder Group. “The recovery in the restaurant sector has brought net lease investors back into this category.”
The net lease casual dining industry returned to some semblance of normality in 2022. In the first quarter of 2022, the discount associated with the net lease casual dining industry compressed to 28 basis points from 82 l ‘last year.
“Investor interest in casual dining space is heavily focused on higher quality properties with strong tenants or high quality real estate,” adds John Feeney, Senior Vice President, The Boulder Group.
In the first quarter of 2022, the bid-ask spread narrowed to 15 basis points, illustrating the competition for assets sought by investors. Additionally, corporate-backed leases are priced at a 65 basis point premium over their franchise-backed counterparts.
Demand for net lease casual restaurants will continue through 2022 and will remain in high quality tenants or properties with strong underlying real estate. Properties with contested brands or above market rents will continue to present a challenge for sellers looking to sell their properties.
To view the full report: https://bouldergroup.com/media/pdf/Net-Lease-Casual-Dining-Research-Report.pdf
About the Boulder Group
The Boulder Group is a Chicago-based investment real estate services firm specializing in transaction and advisory services for single-tenant net leasehold properties. Founded in 1997, the company has closed over $6 billion in net rental real estate transactions. The company offers a full range of brokerage, research, advisory and financing services nationwide. The level of annual sole-tenant transaction volume consistently ranks the company among the top 10 companies nationally, based on industry benchmarks determined by CoStar and Real Capital Analytics.
Company Name: The Boulder Group
Contact person: Randy Blankstein
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Address:3520 Lake Avenue, Suite 203
Country: United States