The restaurant tenants tend to have leases that feature 10 percent rent escalations every five years or 2 percent rent escalations annually.
Steady investor demand has kept restaurant net lease cap rates in the low range during 2017. In the casual dining net lease sector, quick service restaurants (QSRs) are winning, even if by a photo finish.
Cap rates in the sector averaged 6.11 percent in the third quarter of 2017, tightening by just 8 basis points from 6.19 percent in the first quarter of the year, according to research from Northbrook, Ill.-based net lease brokerage firm The Boulder Group. Within that range, plenty of differentiation was happening between franchisee-backed and corporate-backed net lease properties. Although franchisee-owned dining properties experienced plenty of demand from investors, corporate-owned restaurants came in with tighter overall cap rates on completed deals.