Cap Rate Compression (2026 NNN Market)
As of early 2026, the single-tenant NNN market is compressing for the first time after twelve consecutive quarters of cap-rate expansion (mid-2022 through late 2025). Average single-tenant net-lease retail cap rates fell to ~6.45% (from a Q3 2025 peak of 6.79%). Multiple buyer types — 1031 investors, net-lease REITs, private equity, and international capital — are re-entering simultaneously, driving the compression. Buying into a compressing market offers potential appreciation on top of income, but the relationship reverses if rates rise again (cap rate expansion risk).
Key Points¶
- Avg single-tenant NNN retail cap ~6.45% (down 34 bps from peak).
- NNN financing ~5.50–5.90%; positive leverage spread narrow (~55–95 bps).
- The four properties priced at 5.75–6.25% — at or slightly above market average.
- Dental DSO assets argued to trade 7.00–8.50%, implying the HD deals may be priced to a premium.