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How is the Quick Service Restaurant (QSR) Sector Faring in the Net Lease World?

Fast food is everywhere. There seems to be a McDonald’s or Starbucks on every corner. This proliferation of fast food has led to the Quick Service Restaurant (QSR) sector accounting for the highest percentage of net lease sales nearly every quarter.

The QSR label covers the widest range of tenants with varying concepts. The abundance of options has made for an extremely competitive environment. Yet, unlike much of the overall retail sector, QSR’s remain sheltered from the online competition.  Amazon has been forging a path that most retailers have been disrupted by as the online giant chips away at their sales. Online ordering and next day delivery have become standard, and most retailers just can’t compete.

So why is it that the QSR sector is insulated and unfazed by the online forces taking place? Most QSR’s don’t see it as an issue, at least not an issue for the near future. Food delivery is not a disruptive new idea and fast food is typically eaten out, limiting the ability for an online group to disrupt the industry. While some concepts have fallen for a variety of reasons, new restaurants constantly spring up to try new things or put a new twist on an old concept. In recent years, consumers have become increasingly health conscious, and the industry has adjusted. Most places began offering healthier foods while some chains of healthy fast food have capitalized on this trend.

Part of the competition for customers is being the most convenient place to grab food. This will cause QSRs to try and find properties that are clearly visible from roadways, have a high traffic count, and easy points of ingress and egress. These aspects are attractive for any retail property and have helped sustain the QSR sector’s premium over the Single Tenant Net Lease (STNL) average in each of the last 7 years.  The type of leases that are commonly signed by QSRs is another factor contributing to the 50 bps premium over other SNTL properties. QSR’s are usually subject to triple net or ground leases, both of which leave the investor with no landlord responsibilities. These passive investments typically trade at lower cap rates than double net leases.

The QSR sector has a bright future. The locations tend to have strong real estate fundamentals, while the tenants have continued to evolve to keep up with ever-changing consumer demand. These are positive signs for continued strength in the QSR sector.  A full report on the QSR Sector can be found on Calkain’s website.

If you are looking to purchase a QSR to balance out your commercial real estate portfolio, make sure to contact us today so that we may guide you to and through the right investment.  You can also check our Net Lease Advisor which can help you evaluate your investment opportunity by learning more about the creditworthiness of the tenant.  Let us help you make smart decisions.

Traci BidingerHow is the Quick Service Restaurant (QSR) Sector Faring in the Net Lease World?

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