The State of Convenience Store Cap Rates

Convenience stores are expected to be occupied by high-quality tenants this new year. Some of which have achieved cap rates between 4 and 5 percent in the fourth quarter of 2017. If you are a Net Lease Investor and are worried about the future of your convenience stores and their tenants, have no fear.

Recent estimates predict convenience stores will make a total of $73 billion in sales for this coming year. Although this is on the lower end for this sub-market, this actually results in a total sales growth of about 5.5%, up from the previous year.


According to a recent report from The Boulder Group, these types of investments are a great and rewarding asset for any net lease and 1031- exchange portfolio, reaching an overall average asking cap rate of 6.07%. This sector’s cap rate didn’t necessarily see much momentum this last year, but this doesn’t necessarily mean it’s a bad thing. Convenience stores typically enjoy these lower cap rates which suggests that the beginning of a shift is occurring in the market.


Many experts suggest this is no longer a seller’s market, but instead is at a more neutral position, depending on the asset type of course. If you’ve ever wondered what contributes to the calculation of a cap rate, associate director for Tulsa states that, “final cap rates usually depend on the movements of Federal Funds and Treasury rates.” 


Any movement in cap rates won’t be something that investors will see immediately, much of the time any change in cap rates takes months to see into fruition. Giovanni Oliva, an associate director with Stan Johnson believes that any material difference in cap rates will take somewhere around 6 months. With predictions that convenience stores like 7-Eleven will be offered at a potential cap rate of 3.75 percent.


To learn more about your Net Leases and whether or not you should be worried about convenience store tenants check out, National Real Estate Investors’ article, “Should Net Lease Investors Worry About Convenience Store Tenants.”


To learn more about 1031- Exchanges check out our 1031- Exchange Series to learn all there is to know about participating in such an exchange.