After three years of steady increases, cap rates in the single-tenant net lease sector have largely stabilized, signaling a potential turning point for investors and property owners. The second quarter of 2025 saw only a marginal uptick in overall cap rates, rising by a single basis point to 6.79% according to a new report by The Boulder Group. This marks a notable shift from the rapid increases that characterized the market from 2022 through 2024, a period shaped by rising interest rates and economic uncertainty.
Retail properties experienced a slight increase in cap rates to 6.57%, while office properties saw a more pronounced jump to 7.85%. Industrial, in contrast, held steady at 7.23%. The Boulder Group attributes this plateauing to the Federal Reserve’s decision to keep rates unchanged in 2025, as well as to a broader sense of equilibrium returning to the market following years of volatility. Investors appear to have adjusted to the new interest rate environment, and the balance between supply and demand is showing signs of normalization.
Transaction activity in the net lease sector has shifted noticeably toward high-credit tenants. Premium brands such as 7-Eleven, Chase Bank, and Wawa are commanding cap rates well below the market average, often trading at sub-6% levels. For example, a 7-Eleven in Summerville, South Carolina, sold for $8.7 million at a 5.27% cap rate with 15 years remaining on its lease, while a Chase Bank in Fredericksburg, Virginia, fetched a 4.75% cap rate with 14 years left.
In contrast, properties leased to tenants facing corporate headwinds, such as Walgreens, are seeing cap rates climb above 7%. A Walgreens in Homestead, Florida, recently sold at a 7.13% cap rate, reflecting investor caution.
The Quick Service Restaurant (QSR) sector continues to attract aggressive pricing. Chick-fil-A and McDonald’s, particularly on ground leases, remain among the most sought-after assets, achieving cap rates of 4.45% and 4.38% respectively. These low rates underscore the premium investors are willing to pay for long-term, stable income streams from well-established brands.
In the same sector, Starbucks saw a modest increase in cap rates to 6.40%, while Panera Bread's cap rate edged up to 5.75%.
Despite the stabilization in cap rates, transaction volumes remain below previous highs, especially in the 1031 exchange market. However, the narrowing spread between asking and closed cap rates—now just 30 basis points for retail and 27 for industrial—suggests that buyers and sellers are finding more common ground. This greater alignment points to improved market liquidity and a renewed willingness among investors to engage in transactions.
The industrial sector has been particularly active, with the number of properties on the market rising by 10.8% in the second quarter. Notable transactions include the sale of a Frito-Lay facility in Burbank, Washington, for $25.4 million at a 5.99% cap rate and an Ascend property in Jackson, Tennessee, which traded at a 9.65% cap rate. These examples illustrate the diverse range of pricing within the sector, which is influenced by factors such as tenant quality, lease duration, and property location.
Lease term remains a key driver of pricing across all sectors. Properties with longer duration—often 15 years or more—consistently achieve lower cap rates, reflecting the reduced risk for investors. For instance, auto parts stores with 16 to 20 years remaining on their leases are trading at cap rates as low as 5.60%, while those with five years or less can see rates climb to 7.90% or higher. The same pattern is evident in the dollar store segment, where Dollar General locations with less than three years remaining on their leases are trading at cap rates approaching 9%.
Looking ahead, The Boulder Group experts expect the net lease market to gain momentum through the remainder of 2025. While pricing and transaction volumes are not likely to return to the peaks of past years, the current environment of stable cap rates, narrowing bid-ask spreads and increasing market activity suggests a more balanced and resilient sector. Investors are likely to remain focused on tenant credit quality, lease duration, and signals from the Federal Reserve as they navigate the evolving landscape.
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