Single-tenant net lease cap rates posted modest compression in early 2026, underscoring resilient demand for the asset class even as interest rate relief is pushed further out. The Boulder Group’s Q1 2026 Net Lease Research Report found that overall single-tenant net lease cap rates declined by one basis point to 6.80% in the first quarter.
Performance varied by property type. Retail cap rates held steady at 6.55%, marking the second consecutive quarter without movement in that segment. Office assets saw more pronounced compression, with cap rates moving in by 10 basis points to 7.90%. Industrial net lease assets registered a five-basis-point decrease, ending the quarter at an average cap rate of 7.15%.
Randy Blankstein, president of The Boulder Group, linked the current investment climate to monetary policy and inflation trends. He noted that the Federal Reserve elected to keep benchmark rates unchanged at both its January and March 2026 meetings, while inflation has remained above the Fed’s target. Together, those factors have delayed expectations for meaningful rate cuts later into the year.
Despite that backdrop, Blankstein observed that transaction activity has not fallen off materially. He stated that net lease transaction volume has remained steady, interpreting this as evidence that demand for single-tenant net lease assets is now firmly entrenched among investors.
On the supply side, The Boulder Group’s research pointed to a tighter market. Net lease property supply declined by 9.8% in the second quarter relative to the first quarter. The report attributes this pullback in available inventory in part to elevated sales activity during the fourth quarter of 2025, which was supported by 100% bonus depreciation for certain asset classes. That strong closing-quarter deal flow helped carry transactional momentum into the opening months of 2026.
Investment behavior is also bifurcating more sharply along credit lines. Jimmy Goodman, a partner at The Boulder Group, said the gap between investment-grade credit tenants and all other credits is wider than it has been in some time. According to Goodman, institutional buyers, 1031 exchange investors and private capital are increasingly converging on a limited set of high-quality, long-term net lease opportunities backed by stronger credit. In contrast, he noted that assets falling outside that profile are trading more selectively and at wider spreads.
Goodman added that sellers who recognize this divide are adjusting their pricing strategies and still finding success in bringing transactions to the finish line.
