Net Lease News

B+E Weekly Newsletter

January 9 – January 15, 2024

MARKET

FED RATE CUTS MAY WAIT AS INFLATION TICKED UP IN DECEMBER | Reuters

• The consumer price index (CPI) rose 0.3% in December after increasing 0.1% in November, the Labor Department’s Bureau of Labor Statistics said on Thursday.
• U.S. central bankers want more confirmation that inflation is on a firm path toward their 2% goal before they reduce the policy rate, now in the 5.25%-5.5% range.
• Futures contracts that settle to the Fed’s policy rate are still pricing in about a 65% chance of a Fed rate cut in March, down from about a 70% chance seen before the report, and see the Fed taking the policy rate down below 4% by the end of the year.

INDUSTRIAL

INDUSTRIAL VACANCY RATE EXPECTED TO PEAK AT 6.5% IN H2 | Globe St

• The industrial vacancy rate topped 5% in the fourth quarter for the first time in three years and that trend is expected to continue through 2024 as new supply outstrips demand.
• Big box space in particular has become increasingly difficult to fill. Meanwhile, demand for infill space remains strong. With smaller infill units, the vacancy rates remain very low, and as a result, operating fundamentals and rent growth continue to be healthy.
• There are 390 million square feet of unleased industrial space under construction across the country set to complete and drive vacancy up further. Most of that space is within projects that have been under construction for over nine months.
• Owners of industrial properties are still benefiting immensely from a rent perspective, since their in-place leases that are expiring are on average, four or five years old, and many are getting renegotiated and renewed at new rents that are more than 40% higher, as the enormous rent gains that occurred during the pandemic are factored in.

RETAIL

BURGER KING TO ACQUIRE LARGEST OPERATOR CARROLS RESTAURANT GROUP FOR $1 BILLION | QSR Magazine

• Burger King announced Tuesday it will acquire Carrols Restaurant Group, its largest franchisee, for roughly $1 billion.
• Carrols owns 1,022 Burger King stores in 23 states, which earned a combined $1.8 billion in systemwide sales during the 12 months ending September 30. Carrols also operates 60 Popeyes units in six states.
• The fast-food giant paid $9.55 per share for the publicly traded Carrols, which represents a 23.1 percent premium of the franchisee’s 30-day average stock price as of January 12. The purchase is expected to close in the second quarter.

7-ELEVEN TO ACQUIRE 204 STRIPES STORES IN $1 BILLION DEAL | chainstorage.com

• The convenience store giant has agreed to acquire 204 stores from Sunoco LP, which includes Stripes convenience stores and Laredo Taco Company restaurants. The deal is valued at approximately $1 billion.
• The stores being acquired are located across West Texas, New Mexico, and Oklahoma. The locations will join the more than 13,000 7-Eleven, Speedway, and Stripes locations that 7-Eleven currently operates, franchises, and/or licenses across the U.S. and Canada. 
• With the addition of the stores, 7-Eleven will own and operate all Stripes and Laredo Taco Company locations across the United States.

DUTCH BROS TO OPEN 150 TO 165 LOCATIONS IN 2024 | chainstoreage.com

• The drive-thru coffee chain said it expects to open at least 150 to 165 locations systemwide in 2024. 
• Dutch Bros opened 159 new outposts in 2023, of which 146 were company-operated. The company has set a long-term goal of 4,000 shops in the next 10-to-15 years. 

FREDDY’S AIMS FOR 800 RESTAURANTS BY 2026 | chainstoreage.com

• The fast-casual chain known for burgers and ice cream opened a company-record 62 new restaurants across the United States last year, including its 500th location. 
• As a result of development agreements signed in 2023 with both new and existing franchisees, Freddy’s is set to further expand its footprint in Florida, Georgia, North Carolina, Texas, and more. It currently has over 130 locations in development.
• Freddy’s plans to open between 60 to 70 locations in the U.S. and Canada in 2024. The chain says its goal is to reach 800 operating stores by 2026.