Net Lease Cap Rates Climb to Decade-High as Rates Bite

Single-tenant net lease capitalization rates reached their highest level in more than a decade during the third quarter, as rising borrowing costs pressured pricing while buyers continued to favor properties with strong tenants and long leases.

Overall cap rates increased 10 basis points to 6.92%, according to The Boulder Group’s third-quarter 2026 research report. It was the second consecutive quarterly increase and the largest quarterly gain since 2023.

Retail cap rates rose nine basis points to 6.69%, office rates increased 10 basis points to 8%, and industrial rates climbed three basis points to 7.28%.

“The Fed’s September increase and a 10-Year Treasury above 5% changed the math for net lease investors this quarter,” said Randy Blankstein, president of The Boulder Group.

Property supply declined 0.7% from the previous quarter to 5,754 listings, following a 12.5% increase in the second quarter. Retail listings fell 3.7% to 4,289, while office supply increased 6.2% to 703 and industrial availability rose 11.9% to 762.

The gap between buyers’ and sellers’ cap rate expectations widened three basis points to 25 basis points for both retail and industrial properties. The office spread remained at 50 basis points.

Investors continued to pay premiums for tenant credit quality and lease duration. McDonald’s and Chick-fil-A ground leases carried the lowest asking cap rates, at 4.5%.

“Buyers want credit and they want lease term, and they are paying for both,” said Jimmy Goodman, a partner at The Boulder Group.

Higher financing costs are creating additional challenges for leveraged buyers, particularly those pursuing larger properties, according to the report.

Although transaction activity posted double-digit annual growth through the second quarter, The Boulder Group cautioned that higher Treasury yields and expectations for further rate increases could temper the fourth quarter’s traditionally stronger deal activity.