Could investors be overeating at Panera Bread, KFC, and Dunkin' Donuts? At least one Atlanta retail expert thinks so.

Marcus & Millichap's Don McMinn—who's a panelist at Bisnow's fourth annual Atlanta Retail Real Estate Summit next week—says the flood of 1031 exchange money is overpaying for triple-net deals, particularly standalone retail stores with long-term, credit leases to national retailers.  In many cases, these sales are hitting sub-5% cap rates, regardless of location. “There's no delta in the cap rates between East and West coasts. That's a bubble. That's not going to last,” he warns.

Don says 1031 exchange investors like the creditworthiness of many of these tenants and the long leases, especially since they're having to park money elsewhere or face stiffening taxes. But these exchange investors have even been shopping for typical shopping centers. Most recently, he brokered the sale of Doraville Plaza (above) for Halpern Enterprises to a group of 1031 investors.

The cap rates have surprisingly continued to decline, even though interest rates have been going up, says Newburger-Andes' David Andes (whom we snapped with colleague Steve Farrar at the Buckhead Club). He's still buying triple-net deals, but tells us competition is up. Additionally, he's seeing caps for the types of stores he buys averaging around 6% when they were as high as 8% last year.

To chase better returns, David says his firm has begun financing the construction of single-tenant retail stores and then owning. Most recently, he financed the construction of a Dunkin' Donuts on Cobb Parkway (no renderings, so we decided to whet your appetite instead), translating into an 8-cap, he says. He's doing the same with a Huddle House in Florida. “To get an edge on this market, I figure I need to fund the front end of these deals. That's helped me compete,” he says. (Register now to hear more on the hot retail sector at our March 27 event in the W Midtown.)