2026 Market Forecasts

Key Findings

The H1 2026 rate environment has shifted materially. 10-Year Treasury yields climbed above 4.50% as CPI re-accelerated to 4.2% YoY in May driven by Middle East energy shocks. Cap rates have expanded across most sectors. Industrial NNN properties are holding near 5.3% average reflecting strong operational demand but limited further compression. Retail NNN cap rates have expanded to 6.2-6.4% as energy costs pressure consumer discretionary spending and tenant margins. Office NNN cap rates have widened to 7.8-8.2% as higher rates compound hybrid work headwinds. Medical office and specialty healthcare remain the bright spot at 5.6-5.9%, benefiting from essential service demand and aging demographics.

H1 2026 NNN transaction volume of $33.6B is tracking to set a new full-year record of $67-70B, surpassing 2025's $66.8B. Q1 hit $16.8B (up 12% YoY) and Q2 is tracking at $16.8B. 1031 exchange activity continues to generate $10-12B quarterly reinvestment demand. Despite rising Treasury yields, deal velocity remains strong as investors seek inflation-hedged income from NNN leases with annual escalators. Portfolio acquisition activity comprises 55% of volume with institutional consolidation accelerating. Energy cost inflation is creating selective opportunities in distressed retail dispositions.

The 2026 macro environment has shifted significantly from early-year forecasts. CPI has re-accelerated to 4.2% YoY in May driven by energy cost shocks from the Middle East conflict. The Fed has held rates at 3.50-3.75% through the April meeting with 8-4 dissent (strongest since 1992), and markets now price zero cuts through year-end. 10-Year Treasury yields have climbed to 4.53%, well above the 4.0-4.4% range forecasted earlier. GDP growth is moderating to 1.8-2.1% as energy costs weigh on activity. The next FOMC meeting (June 16-17) will be critical. NNN investors should model for 4.4-4.8% 10-Year yields through H2 2026.

Industrial logistics expected to maintain 65-70% deal flow dominance as supply chain normalization and e-commerce growth continue supporting tenant demand and valuation premiums. Retail sector forecast to stabilize at 22-25% deal flow as consolidation removes weakest tenants and essential services outperformance continues. Office sector expected to remain challenged at 3-5% deal flow, with Class B properties facing difficult market conditions. Specialty sectors (self-storage, automotive, QSR) forecast to grow to 8-10% deal flow as investors seek diversification and alternative yield opportunities. Geographic composition expected to maintain tier-1 at 35-40% and tier-2 growth markets at 60-65%.

Looking Ahead

The 2026 NNN market outlook is constructive with cap rate stability supporting continued portfolio investor demand and transaction volume growth. Industrial logistics will likely command the bulk of new capital deployment while retail stabilization creates selective opportunities. The market fundamentals remain sound with investment-grade tenant quality, lease renewal rates exceeding 94%, and geographic diversification opportunities. Portfolio investors should continue emphasizing quality industrial logistics, essential retail services, and geographic diversification into tier-2 growth markets. Market risks include potential economic slowdown in H2 2026, further office sector deterioration, and potential Fed rate increases if inflation re-accelerates. Base case scenario supports 5.1% cap rate environment and $35B transaction volume.

Research and analysis on this page are for informational purposes only and do not constitute investment, financial, or tax advice. Forward-looking projections are estimates based on current market conditions and may not reflect actual outcomes. Data should be verified with primary sources before use in investment decisions. Past performance does not guarantee future results.