SRS Real Estate Partners announced its Capital Markets team closed 2024 with in excess of $2.5 billion in transaction value having completed more than 600 deals across the United States. In comparison, the team continues to outperform much of the industry, posting a 20% year over year increase, despite what has been a persistently challenging market.
“Retail and industrial investments have been incredibly resilient over the past two years with stronger transaction activity and lower cap rates than investors expected,” says Matthew Mousavi, SRS Capital Markets Senior Managing Principal & Co-Head of National Net Lease. “This reflects the demand and appeal of these asset types, which we believe will continue into 2025. As rates compress further, we anticipate increased investor demand and transaction activity.”
Patrick Luther, Senior Managing Principal & Co-Head of National Net Lease, SRS, added, “After a punishing year over year decline between 2022 to 2023 in capital markets activity and total volume sold, 2024 volume for SRS, up 20% year over year, shows that the market has reached an inflection point. Investors are returning to the market and acquisitions activity is resuming at more normal levels. We aren’t out of the woods yet and interest rates continue to pressure and keep historical cap rates elevated, but we’ve turned the corner and are seeing net leased sales volumes starting to increase again versus decline quarter after quarter.”
According to SRS, the top performing retail categories at 46% are QSR, convenience, gas, automotive, pharmacy and dollar stores. From a geographic perspective, SRS reports that out of the 45 states where properties were sold, the greatest amount at 35% were sold in the Southeast.
The broader narrative about supply outpacing demand remained relevant throughout 2024 and into 2025 which ultimately affects the pricing of assets. The more telling trend is the muted effect of cap rate expansion in better MSAs for well-located properties.
Patrick Nutt, Senior Managing Principal & Co-Head of National Net Lease, SRS added, “There are certainly more net leased assets to buy in the United States compared with two or three years ago, and that has pushed cap rates a bit higher, but the number of sites with quality tenants and in top-tier markets like Florida, Texas, Tennessee, North Carolina, etc. remain limited and therefore valuations have held up.” Nutt continues, “While demand remains and the overall number of transactions improves, the required marketing timeline is back to 2018-2019 levels.”
Mousavi adds that success in 2024 was attributed to diligence in deal matching, creativity, and optimism for the new year. More buyers are showing interest in investment properties, and there is an expectation that the incoming administration will have an agenda that is supportive of the real estate industry.
According to SRS, transactions underscore the trends that drove activity in 2024:
Break-Up Investment Strategy – SRS’ latest $7.4 million ground lease sale of a 5,585-square-foot Wawa within Legacy Square, a new 350,000-sf open air shopping center in New Jersey, marks more than $100 million across nine property sales and eight individual buyers that the SRS team executed as part of a break-up strategy on behalf of Cypress Equities and Stockbridge Capital. As SRS notes, subdividing each building and parcel within Legacy Square gave private investors and the broader market a chance to own a piece of an institutional-quality asset that otherwise would not have been available to them in the greater New York City region.
Another break-up strategy was the record-breaking $13.3 million sale of a newly developed EoS Fitness property in French Valley, Calif. The 38,000-square foot building is the anchor tenant within French Valley Marketplace, a new 78,400-sf shopping center. The closing cap rate was 6.3% – a record low cap rate for the EoS brand in 2024. SRS worked on behalf of the French Valley Marketplace developer to market and sell the center as part of a break-up strategy over the past few years, selling off parcels individually to maximize overall value. With this transaction, seven assets valued at more than $30 million were sold.
Strength of C-Stores – Especially 7 Eleven – Despite the persistent higher interest rate environment, SRS proved that absorption of 7-Eleven assets outpaced comparable credit tenants. Over an 18-month span, SRS sold a total of 33 properties occupied by 7-Eleven valued at $242 million with an average cap rate of 5.27%.
Coffee Brands Continue Popularity – Over the past 18 months, SRS sold a total of 50 drive-thru properties occupied by coffee shops including Starbucks, 7 Brew, Caribou Coffee, Dunkin’, Dutch Bros Coffee and Scooters Coffee House. All told, the transactions are valued at $135 million and have an average closing cap rate of 5.52%. As SRS cites, investors have been clamoring for these cash-flowing, low maintenance single-tenant assets especially with brands that are aggressively expanding and seeking more U.S. locations to capture a growing market share.
About SRS Real Estate Partners
Founded in 1986, SRS Real Estate Partners is building upon its retail foundation to provide extensive commercial real estate solutions to tenants, owners, and investors. Headquartered in Dallas, with 29 offices in the U.S., SRS has grown into one of the industry’s most influential and respected leaders. Our commitment to excellence is strengthened by our Guarantee of Value and our success is measured in the achievement of our clients’ objectives, satisfaction, and trust. For more information, please visit srsre.com.