ROI Radar

Buyers are scrutinizing small commercial deals, weighign single-tenant NNN against mixed-use properties. Cap rates for single-tenant NNN leases in the Midwest are around 6.2%, with prices ranginng from $1.2 million to $5 million. In contrast, mixed-use properties in urban areas are commanding cap rates of 5.5% to 6.0%, with prices between $2 million and $10 million. Deals with high maintenance costs, low rental income, or environmental concerns are causing buyers to walk away. For insance, a $3 million signle-tenant NNN deal with a 6.5% cap rate and $190,000 annual net operating income may seem attractive, but if the property requires $50,000 in immediate repairs, the ROI takes a hit.