CAP RATES: LATEST TRENDS & ACTIVITY

Over the past year, Treasury rates have inched lower while the market for single-tenant assets has become increasingly bifurcated. Investment grade or strong tenant locations have seen their CAP rates lowered, while risky credit and lesser performing retailers/locations have jumped higher in terms of yield. This report breaks down the key trends behind the continued divergence.

Using data through April 2026, we reviewed 10-Year Treasury trends back to 2015 and compared them with spreads across select national retail tenants, restaurant and retail categories, and medical-related tenants. Only assets with six or more years of primary term were included.

Across the fourteen (14) tenant types analyzed, CAP rates increased an average of fourteen (14) basis points between the trailing-twelve-month period ending April 2026 and April 2025, leveling out a bit from the thirty-eight (38) basis point increase over the prior trailing-twelve-month period. A clear “flight to quality” dynamic has emerged, with investor demand increasingly concentrated towards assets offering strong tenant performance, credit and a premier location. As an example, strong credit larger format grocery trades compressed thirty-one (31 bps) basis points and urgent care trades compressed fifteen (15 bps) basis points. Walgreens (69 bps), CVS Pharmacy (66 bps), and the Casual Dining sector (47 bps) took the biggest hit, likely due to market saturation and a lack of rent growth in most of the Pharmacy leases, paired with Walgreens’ late 2025 acquisition by Sycamore Partners and the struggling pharmacy sector as a whole. 

Net-lease investment volume increased by 16% over the previous year to $51.4 billion in 2025. Early indications suggest that transaction volume in the first part of 2026 has moderated relative to the same period last year. While higher-credit deals continue to transact, average time on market has lengthened by 42 days across every tenant category analyzed compared to a year ago. At the same time, some development pipelines have slowed due to higher debt costs and softer exit cap rates. For instance, Starbucks, whose development activity has decelerated over the past year, has seen a 30% reduction in on-market inventory relative to the same period last year.

We also compared pricing in income tax–free states versus all others. The majority of both on-market and sold assets traded at lower CAP rates in tax-free states, driven by stronger investor demand and better after-tax returns. The largest differences were seen with Chipotle and Wawa, whose listings and recent sales in tax-free states were 47–52 basis points tighter than comparable assets in non-tax-free states.

Please review the attached report and contact the Forged Real Estate team to discuss these findings in more detail.