Net-Lease Investment Volume Falls in 2023; Stabilization Expected in 2024

U.S. Net-Lease Investment | Q4 2023

February 16, 2024 2 Minute Read

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Executive Summary

  • Net-lease investment volume fell by 45% year-over-year in Q4 2023 to $8.3 billion. Total commercial real estate investment volume fell by 44% to $81.2 billion.
  • For full-year 2023, net-lease investment volume fell by 51% from 2022 to $38 billion, while total commercial real estate volume fell by 52% to $ 348.4 billion.
  • Industrial & logistics' share of net-lease investment volume increased to 50% in Q4 2023 from 43% in Q4 2022, while the retail sector’s share rose to 28% from 25%. Office’s share decreased to 23% from 32%.
  • The average net-lease cap rate increased by 60 basis points (bps) year-over-year in Q4 to 6.4%, largely due to higher borrowing costs, the elevated U.S. 10-year Treasury yield and economic uncertainty. CBRE expects that net-lease cap rates will begin to stabilize in H2 2024.
  • The average 10-year Treasury yield increased by 40 bps year-over-year in Q4 to 4%, although it fell by 40 bps quarter-over-quarter. Spreads between the average net-lease cap rate and 10-year Treasury yield increased to 234 bps in Q4 2023 from 212 bps in Q4 2022. We expect the yield will gradually decline to 3.6% by year-end as inflation cools and economic growth slows.