Single-Tenant Net Lease Cap Rates Rise, Boulder Group Reports
(Illustration: The Boulder Group)
Single-tenant net lease cap rates increased two basis points during the second quarter to 6.82%, according to The Boulder Group, Wilmette, Ill.
The firm’s second quarter Net Lease Research Report said retail cap rates increased five basis points to 6.60% and industrial cap rates increased 10 basis points to 7.25% while office cap rates remained unchanged at 7.90%.
“The Federal Reserve’s decision to remove the expected 2026 rate cut from its projections, and the possibility of a rate increase later in the year, changes the calculus for net lease investors in the second half of 2026,” Boulder Group President Randy Blankstein said.
But Blankstein noted the sector’s transaction volume has remained steady.
The Boulder Group reported that single-tenant net lease property supply increased 12.5% quarter-over-quarter in Q2 2026, reaching approximately 5,800 properties on the market. The retail sector accounted for most of that increase, with supply surging 16.2%, though high-quality net lease assets with investment-grade tenants and long-term leases represented less than 10% of overall retail supply even as the broader inventory expanded.
“The supply increase we saw in Q2 2026 tells a very specific story when you look at what is actually coming to market,” added Boulder Group Partner Jimmy Goodman. “The growth is concentrated in non-credit retail product. High-quality, investment-grade net lease assets with long lease terms remain scarce, and that scarcity is why competitive pricing on premium product has not moved in any meaningful way.”
The report said premium long-term assets attract competitive pricing across investor classes, with ground lease product for tenants such as McDonald’s and Chick-fil-A asking the lowest cap rates in the sector at 4.45%. But shorter-term and non-rated assets moved more selectively at wider effective spreads. Across the five net lease sectors Boulder examined, the auto parts sector remained unchanged at 6.45%, the dollar store sector increased two basis points to 7.49% and the drug store sector held steady at 7.85%. In the quick service restaurant sector, corporate QSR cap rates increased three basis points to 5.85% while franchisee QSR cap rates increased five basis points to 6.85%.
Boulder Group Senior Vice President John Feeney said buyers are doing more homework today than they were a year ago, particularly around tenant financials and store-level performance. “But when the credit is strong and the lease structure is right, deals are getting done,” he added. “The tightening in bid-ask spreads this quarter tells you pricing alignment is still there on quality product.”
The firm said it anticipates that net lease transaction volume will remain steady through the remainder of 2026, supported by continued investor demand for the asset class. “It is important to note that net lease cap rates do not move in lockstep with interest rates, as property fundamentals, tenant credit quality, lease term, and investor demand all play significant roles in cap rate movement,” the report said. “Investors are expected to continue scrutinizing tenant financials and store-level performance carefully when underwriting net lease investment opportunities.”
