Cap Rates Compress For Early Learning Assets
Cap rates have continued to compress for early education centers in the net lease space during this quarter, according to a new report from B+E Net Lease. On-market cap rates hit a record low in Q3 for such assets, with the average breaking 6% at a 5.99% cap.
“Historically, early learning assets have traded at higher cap rates in comparison to other net lease assets such as QSRs,” the firm’s analysts note. “This has shifted as the reputations and creditworthiness of the larger early learning tenants have steadily grown, alongside the expansion of their businesses and nationwide footprints. Investors favor the internet-resistant nature, long lease terms, quality underlying real estate, and strong/growing demand for these assets.”
On-market listings in Q4 feature more properties with 10 or more years of remaining lease term and a larger average offering price, B+E analysts say. The report cites 33 on-market properties with 15 or more years of remaining term, 59 with 10 to 14 years remaining, and 29 with 9 or fewer years remaining. The lowest on-market cap rate was 4.75% and the highest was 7.25%, translating to an average of 5.99%.
The report tracks 121 properties on market, at an average price of $5.3 million and average size just over 11,000 sf.
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