Mapped: Breaking Down Dollar Store Cap Rates, Will They Continue to Drop?

Dollar stores are all the rage, it seems, eating away at Walmart market share with massive mergers ($8.5B, to be exact),savvy brick-and-mortar strategy and clever use of real estate. Despite this growth, cap rates could be headed for a free fall, according to new market data. Today's edition of Mapped takes a look at the dollar store sector's cap rates by region. In addition to this cool cap rate road map, the report reveals interesting—and perhaps worrisome—facts about dips across the sector as each dollar store franchise has experienced different levels of compression.

Dollar stores boast a 6.5% cap rate average—a 50 basis point drop from a year ago; the sector as a whole saw sinking cap rates. Dollar General compressed basis points,Dollar Tree 10 points and Family Dollar a whopping 100 basis points. But, as the report points out, this huge compression can be attributed to Family Dollar’s lease structure change (now up to 15 years, triple net and rental escalation every three years).

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