Market Data
Market Trends

Cap Rate Trends by Sector

Analyze cap rate compression, sector rotation, and valuation opportunities across NNN property types in today's rate environment.

Data as of Q2 2026
Median asking cap rate
6.82%
Boulder Group, Q2 2026
Class A Retail
6.60%
Retail median asking, Boulder Q2 2026
Class B Retail
6.60%
Retail median asking, Boulder Q2 2026
Industrial
7.25%
Industrial median asking, Boulder Q2 2026
Medical
Not published
Not in the Boulder print

Cap Rates by Sector

Essential Retail - Class A (Grocery, Pharmacy)6.60%
Quick Service Restaurants - Class ANot published
Industrial Warehouse - Class A7.25%
Medical Office - Class ANot published
Retail - Class B (Regional Chains)6.60%
QSR / Casual Dining - Class BNot published
Industrial - Class B (Older/Smaller)7.25%
Dollar Store / Discount RetailNot published
Car Wash / SpecialtyNot published
Fitness Centers - Class BNot published
Sector Insights
Class A industrial properties command the lowest cap rates (highest valuations) due to structural e-commerce tailwinds and institutional buyer demand. Essential retail and medical provide stable mid-range yields. Class B properties across all sectors trade 50-120 bps wider than their Class A equivalents, reflecting shorter lease terms, weaker tenant credit, and older building stock. Class B QSR and regional retail face the widest spreads - 100+ bps above Class A - as lenders apply more conservative underwriting. However, Class B assets in strong infill markets can offer compelling risk-adjusted returns for value-oriented investors.

Sector Deep Dive

Essential Retail - Class A

Typical Cap Rate
6.60%
Lease Term
10-15 years
Tenant Quality
A/A+: Grocers, Pharmacies
Growth Trend
Stable demand post-pandemic

Retail - Class B

Typical Cap Rate
6.60%
Lease Term
5-10 years
Tenant Quality
B/B-: Regional chains, franchisees
Growth Trend
Selective, credit-dependent

QSR & Casual Dining

Class A Cap Rate
Not published
Class B Cap Rate
Not published
Lease Term
10-12 yrs (A) / 5-10 yrs (B)
Growth Trend
Recovery momentum

Industrial - Class A

Typical Cap Rate
7.25%
Lease Term
10-20 years
Tenant Quality
A: Logistics leaders
Growth Trend
E-commerce tailwinds

Industrial - Class B

Typical Cap Rate
7.25%
Lease Term
5-10 years
Tenant Quality
B+: Smaller distributors, flex
Growth Trend
Steady, infill markets strong

Medical/Healthcare

Typical Cap Rate
Not published
Lease Term
10-15 years
Tenant Quality
A: Healthcare systems
Growth Trend
Aging demographics

What Drives Cap Rates

Interest Rate Impact

  • 10Y Treasury rate is primary cap rate anchor
  • Fed policy directly influences required investor returns
  • Higher rates expand cap rates across all sectors
  • Mortgage rates affect buyer demand, valuation willingness

Class A vs Class B Premium

  • A-rated tenants trade 100-200 bps tighter than B-rated
  • Class B retail trades 70-120 bps wider than Class A equivalents
  • Class B industrial gap is narrower (30-50 bps) due to strong demand
  • Bankruptcy risk and credit spreads widen further for B/C operators

Lease Term Effect

  • 20-year leases command 50-100 bps lower cap rates
  • Longer duration = lower required returns
  • Lease flexibility (renewal options) impacts yields
  • CPI escalators reduce real inflation risk

Geographic Variance

  • Gateway markets (NYC, LA, SF) see tighter cap rates
  • Secondary markets offer wider spreads/higher yields
  • Regional economic growth divergence drives cap rate spreads
  • Local cap rate compression varies by supply/demand dynamics

Historical Cap Rate Evolution

2016
Peak Valuations
NNN cap rates near historic lows (4.0-4.5%). Low interest rates drive property values higher. Aggressive buyer competition.
2018
Rate Normalization
Fed raises rates four times. Cap rates begin widening. Credit events emerge in retail (store closures). Flight to quality accelerates.
2019
Pre-Pandemic
Cap rates stabilize 4.5-5.0% range. Retail facing headwinds but NNN leases provide downside protection. Industrial cap rates compress.
2020
Pandemic Shock
Lockdowns create uncertainty. Cap rates expand sharply as risk premiums surge. Essential retailers prove resilient. Industrial demand surges.
2021
Recovery & Compression
Fed near-zero rates resume. Investor appetite returns. Cap rates compress back toward 4.0-4.5%. Industrial properties in high demand.
2022
Rate Hikes Resume
Fed raises 425 basis points. Cap rates expand 75-100 bps across all sectors. Property valuations decline. Financing becomes more expensive.
2023
Stabilization
Fed pauses in July. Market adjusts to higher rate environment. Cap rates stabilize 5.5-6.5% depending on sector. Credit quality becomes paramount.
2024
Normalization
Fed cuts rates 100 bps. Cap rates moderate as investor confidence returns. Best-in-class NNN properties attract strong demand. Spreads normalize.
2025
Inflation Resurgence
Energy-led inflation spike forces Fed to pause cuts, then reverse course. Cap rates tick back up 10-20 bps. Q1 2026 transaction volume rebounds 25% YoY as buyers adjust to higher-for-longer.
H1 2026
Current Market
NNN cap rates at 6.82%. Fed holding at 3.50-3.75% with three dissents favoring hikes. Retail cap rates at 6.60%, industrial at 7.25%. Sale-leasebacks surging as corporates lock in capital ahead of potential rate increases.
H2 2026+
Forward Outlook
Markets pricing 1-2 rate hikes by year-end. CPI cooling to 3.4% but above 2% target. CMBS delinquencies improving (4.82% in Q2, down from 5.21% in Q1). Essential retail and medical NNN remain defensive plays.

Key Takeaways

Industrial Strength Persists
E-commerce structural tailwinds keep industrial cap rates compressed. Institutional buyer demand remains strong despite macro uncertainty. Best-in-class logistics properties trade sub-5% yields.
Essential Retail is Resilient
Grocery, pharmacy, and convenience retailers prove recession-resistant. Long-term leases to A-rated tenants provide downside protection. Cap rates offer attractive income relative to treasuries.
Sector Rotation Ongoing
QSR and specialty retail facing headwinds post-pandemic. Medical office and healthcare service properties benefit from aging demographics. Flight-to-quality favors investment-grade tenants.
Class B Offers Higher Yield
Class B NNN properties trade 50-120 bps wider than Class A equivalents. Regional chains, franchisees, and smaller tenants in secondary markets offer 6.5-7.5%+ cap rates. Investors willing to accept shorter lease terms and moderate credit risk find compelling cash-on-cash returns.
Quality Premiums Expand
A-rated tenant gaps widening relative to B/C operators. Prime markets command tighter cap rates than secondary/tertiary. Investor focus on credit quality and revenue stability drives valuation spreads.

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Related Resources

Interest RatesCRE SpreadsInflation ImpactYield BenchmarksSector OutlookMarket Reports

DISCLAIMER: Cap rate analysis on this page is for informational purposes only and reflects market data and sector interpretation. Cap rates vary by specific property, location, tenant, and lease structure. Past cap rate trends do not guarantee future results. This content should not be construed as investment advice. All NNN properties carry risk including tenant credit risk, lease renewal risk, and property-specific operational challenges. Consult with real estate and financial professionals before making investment decisions.

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