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Private Investors, 1031 Exchanges Dominate Q2 QSR Sales

Chicago Retail
A Chick-fil-A store in Chicago

Compressed cap rates are the main takeaway from The Boulder Group's Q2 2016 Quick Service Restaurant (QSR) Market Research report. Cap rates for properties leased to franchisees are at 5.7%, a drop of 10 bps from Q2 2015. Corporate-owned stores, meanwhile, saw a tighter cap rate compression to 5.45% from 5.65% last year.

The lower cap rate environment is a boon for franchise operators seeking to enter sale-leaseback agreements. Franchisees, meanwhile, can use the increased value of their real estate to secure favorable terms for store expansions, paying down debt and remodeling.

Private investors and 1031 exchanges continue to dominate the QSR sector. The average median asking price for single-tenant QSR assets in Q2 was $1.83M. The biggest cap rate drop in the QSR sector belonged to Chick-fil-A corporate ground leases, which plummeted 25 bps year-to-year, to 4%.