Investment volumes and cap rates have been steady in the c-store sector nationally. Over the last 12 months cap rates have come in at 4.83% for the c-store sector, about 60 basis points lower than the average for single tenant net lease (STNL) transactions. We should note that the business terms of deals are typically agreed upon 60-90 days prior to a deal closing; so a deal that closes today is an indicator of market conditions 60-90 days in the past.

The typical spread in cap rates between the 10-year treasuries and c-stores or even STNLs has been about three percentage points in the last few years. With the rapid increase in interest rates, that difference has narrowed to less than 100 basis points.

Although c-store cap rates may drift up slightly, our outlook is for c-store cap rates to remain relatively stable and not see the same dramatic rise of higher interest rates. The reason for this is because c-store deals are typically smaller, all-cash acquisitions by individuals and not subject to financing requirements typical of larger deals in other STNL sectors. In addition, we will continue to see cap rates and deal pricing vary depending on the specific asset and local market, making it critical to understand the underlying dynamics of even the smaller c-store deals.