Single-tenant retail sales are trending upward despite lingering pressure from higher interest rates that had dampened activity in 2023 and 2024, according to Marcus & Millichap’s Single-Tenant Net Lease Retail Report. Overall, transaction volume is up 18% year to date, reflecting the third quarter, while dollar volume increased 14%.
Private investors are re-emerging as key market participants in a segment where buyer and seller expectations are increasingly aligned. On a trailing 12-month basis, individual investor share of the STNL market is up 15%, portfolio investment share is down 6% and entity-level transactions declined 1%. Private investors accounted for 71% of total dollar volume, followed by foreign buyers at 10%, REITs at 9%, institutions at 6% and cross-border investors at 4% for the year ended September 2025.
Improved transaction activity has contributed to a modest rise in the average sale price, which reached $334 per square foot. Cap rates for the category remain at a 12-year high, holding at 6.5%, though the market is placing an increasing premium on top-tier credit tenants. Historically, the premium for acquiring an asset with a top-credit tenant over a lower-tier tenant averages 100 basis points; as of September 2025, that spread has widened to 140 basis points. Meanwhile, mid-tier cap rates have moved closer to lower-tier averages since 2022.
Lease term length remains a decisive factor in pricing. Properties with less than five years remaining on their lease average a 7.7% cap rate, roughly 120 basis points above the overall mean, reflecting higher perceived risk and limited rent certainty. Assets with five to 15 years remaining trade at an average 6.8% cap rate, closely aligned with the market average, while leases longer than 15 years average 6.1%, benefiting from reduced vacancy risk and greater income security despite limitations on rent adjustments.
As of September 2025, the average spread between STNL retail cap rates and the 10-Year Treasury stood at roughly 240 basis points, up from a low of 200 basis points in 2022. Federal Reserve rate cuts this year may help additional deals pencil during the final quarter of 2025, particularly if they coincide with a dip in Treasury yields.
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