A sector that is entering a period of stability? That’s how The Boulder Group describes the country’s net lease sector in its latest research.
Wilmette, Illinois-based The Boulder Group released its Second Quarter U.S. Net Lease Research Report in early July. According to the report, cap rates in the single-tenant net lease sector saw minimal changes in the second quarter of 2025, with overall cap rates increasing just 1 basis point to 6.79%.
Retail cap rates edged up slightly to 6.57%, an increase of 1 basis point from the end of the first quarter of the year, while office cap rates increased to 7.85%, a jump of 5 basis points. Industrial cap rates remained unchanged at 7.23% for the second consecutive quarter.
“This modest increase in cap rates illustrates a change from the more pronounced upward trajectory experienced from 2022 to 2024,” said Randy Blankstein, president of The Boulder Group, in a statement. “This suggests that the market may be stabilizing after three years of consistent cap rate increases.”
To learn more about the performance of the net lease sector, and to hear Blankstein speak, register for Midwest Real Estate News’ National Net Lease Summit held July 24 at the University Club of Chicago.
The plateauing of cap rates can be best attributed to the combination of the Federal Reserve holding rates steady in 2025, investor adjustment to the current interest rate environment and market stabilization following three years of cap rate expansion, The Boulder Group reported.
“Transaction activity in the second quarter demonstrated a pronounced flight to credit quality, with premium tenants commanding cap rates lower than the market averages,” said Jimmy Goodman, partner with The Boulder Group, in a statement.
According to the report, high-credit retailers like 7-Eleven, Chase Bank and Wawa commanded sub-6% cap rates, while tenants with ongoing corporate challenges such as Walgreens traded at cap rates in excess of 7%. This difference shows that investors are focusing on tenant financial strength as they work though the country’s economic uncertainty.
For further proof of this, look to the quick-service restaurant sector, where corporate QSR brands continued to attract aggressive pricing. In the second quarter, Chick-fil-A and McDonald’s maintained their positions as the most aggressively priced assets in net lease at 4.45% and 4.38% cap rates, respectively.
“The net lease market continues to show signs of stabilization after three years of cap rate increases, with the second quarter marking a notable change in pricing momentum,” said John Feeney, senior vice president with The Boulder Group, in a statement.
While transaction volume remains below historical peaks, particularly in the 1031 exchange space, the narrowing bid-ask spreads and continued institutional participation suggest improved market liquidity, The Boulder Group reported.
With cap rate movements moderating and supply-demand dynamics showing greater balance, net lease activity is expected to gain momentum through the remainder of 2025, according to the report. Pricing and transaction volumes will likely remain well below the peak market conditions experienced in prior years.
Click here to read The Boulder Group’s full report.
