The U.S. net lease market enters 2026 on more stable footing than it held at the start of the prior year. After an extended period defined by interest rate volatility, pricing resets, and uneven transaction flow, market activity across 2025 reflected a clear shift toward recalibration rather than disruption.

Transaction volume rebounded on an annual basis, cap rates moved within narrower ranges, and pricing behavior became increasingly tied to asset-level fundamentals. Buyers and sellers adjusted their expectations for risk, lease structure, and tenant quality, leading to improved alignment and steadier deal execution across multiple net-lease segments.

This outlook reviews how the market performed over the past year and examines the conditions shaping expectations for 2026. Observations are drawn directly from reported transaction data, capital flows, and pricing trends observed throughout 2025, with an emphasis on how these patterns influence acquisition strategy, underwriting discipline, and deal positioning going forward.

Net Lease Market Performance in 2025

Investment volume and transaction activity

Net lease investment volume totaled $48.1 billion for the year ending Q3 2025, representing a 24 percent increase year over year, according to CBRE Research, U.S. Net-Lease Investment Q3 2025 (cited throughout). Over the same period, total U.S. commercial real estate transaction volume rose 21 percent, placing net lease growth slightly ahead of the broader market.

Quarterly activity moderated toward year-end. Q3 2025 volume reached $10.6 billion, reflecting a modest decline both quarter over quarter and year over year. CBRE Research characterized this shift as normalization rather than contraction, noting that a substantial portion of annual growth occurred earlier in the year as pricing expectations realigned.

Multiple publications observed that transaction flow improved as buyers and sellers adjusted underwriting assumptions to reflect sustained higher interest rates rather than waiting for rapid monetary easing.

Cap rates and pricing stability

Cap rates remained elevated relative to pre-2022 levels but showed limited volatility in the second half of 2025.

CBRE Research reported an average net-lease cap rate of 6.9 percent in Q3 2025, up 12 basis points year over year but down slightly quarter over quarter. CRE Daily and Connect CRE both described cap rates entering a holding pattern by late 2025, with quarter-to-quarter movement measured in single basis points.

The spread between net lease cap rates and the 10-year Treasury averaged 265 basis points in Q3 2025, down from 284 basis points a year earlier, according to CBRE Research. While Treasury yields fluctuated throughout the year, publications consistently noted that cap rate behavior became less responsive to short-term rate movements and more dependent on asset-specific risk factors.

Additional brokerage research pointed to the same pattern of pricing stability. According to Northmarq analysis, net-lease cap rates showed limited movement through late 2025, with quarter-to-quarter changes measured in only a few basis points. The firm noted that late-year Federal Reserve rate cuts had minimal immediate impact on net lease pricing, reinforcing the view that valuations had already adjusted to higher borrowing costs. Pricing behavior increasingly reflected tenant credit, lease term, and asset-specific risk rather than macro rate expectations.

Property Type Performance

Retail net lease

Retail net lease maintained a consistent share of overall activity, representing 23 percent of Q3 2025 net lease volume, according to CBRE Research.

Single-tenant net-lease retail transactions increased 18 percent year to date, with dollar volume rising 14 percent, according to Marcus & Millichap data cited by Commercial Property Executive. Retail transaction momentum occurred despite elevated borrowing costs, supported by private buyer participation and narrower bid-ask spreads.

Average retail net lease cap rates remained near 6.5 to 6.9 percent, depending on tenant credit and lease duration. Publications consistently reported that retail assets with strong credit tenants and long lease terms continued to trade at tighter yields than the market average.

Office net lease

Office net lease activity increased materially in 2025, though from a smaller base. Office net-lease investment rose 29 percent year over year to $2.6 billion (CBRE).

Cap rates for office net-lease assets climbed toward 8.0 percent, reflecting uncertainty about long-term occupancy trends. CRE Daily observed that investors active in office net lease prioritized yield and lease security rather than recovery narratives, with pricing explicitly accounting for sector risk rather than avoiding the segment altogether.

Industrial net lease

Industrial remained the largest segment of the net lease market, accounting for 53 percent of total volume in Q3 2025, down from 60 percent a year earlier (CBRE).

On a year-over-year basis, industrial net lease investment declined 19 percent, reflecting a combination of prior over-allocation and aggressive repricing earlier in the cycle. CBRE Research emphasized that industrial fundamentals remained intact, but pricing discipline replaced scarcity-driven competition. Investors continued to view industrial net lease as stable but no longer priced it as a low-risk proxy for bond substitutes (CRE Daily).
 
Buyer Composition and Capital Sources

Private investors

Private investors emerged as the dominant force in the net-lease market in 2025.

Marcus & Millichap data reported in Commercial Property Executive showed that private buyers accounted for 71 percent of single-tenant net-lease retail transactions. CBRE Research reported private capital volume reached $6.5 billion in Q3 2025, increasing 14 percent year over year and 5 percent quarter over quarter.

Publications attributed private buyer dominance to flexible underwriting, longer investment horizons, and willingness to transact at repriced yields. Private investors filled liquidity gaps left by institutions and REITs that remained more constrained.

Institutional investors and REITs

Institutional and equity fund net-lease investment declined 24 percent year over year, though activity rose quarter over quarter in Q3 2025. REIT net lease investment totaled $766 million in Q3, down 9 percent year over year (CBRE). Institutions remained selective, prioritizing scale, credit quality, and pricing clarity. Reduced portfolio-level transactions also contributed to lower aggregate institutional volume.

Cross-border capital

Cross-border net lease investment reached $869 million in Q3 2025, representing 8 percent of total net lease volume, according to CBRE Research. For the year ending Q3 2025, foreign net lease investment increased 30 percent year over year.

Leading sources of cross-border capital included the United Kingdom, Sweden, Canada, Japan, and Singapore, which collectively accounted for 84 percent of international investment. Researchers observed that foreign buyers favored U.S. net-lease assets for their income durability and currency stability (CBRE).

Lease Structure and Risk Pricing

Lease term differentiation

Lease duration remained one of the most influential pricing variables across all net lease sectors.

Marcus & Millichap reported assets with 15 or more years remaining averaged cap rates near 6.1 percent, reflecting reduced rollover risk. Properties with five years or less remaining had average cap rates of 7.7 percent, approximately 120 basis points above the market mean.

Cap rate spreads between short- and long-term leases often exceeded 200 basis points in retail categories such as drugstores, dollar stores, and auto-related properties (CRE Daily and Commercial Property Executive).

Tenant credit premiums

Tenant credit quality commanded a widening premium in 2025. Marcus & Millichap data showed the pricing premium for top-credit tenants expanded to approximately 140 basis points, up from a historical average near 100 basis points.

Mid-tier tenant pricing moved closer to lower-tier averages, reinforcing conservative underwriting standards. Publications consistently emphasized that credit quality and lease security, rather than sector labels alone, determined pricing outcomes.
 
Geographic Patterns

Leading markets

CBRE Research identified Dallas–Fort Worth as the top net lease market for the year ending Q3 2025, with $2.42 billion in transaction volume. Other high-volume markets included Atlanta, Inland Empire, Phoenix, Houston, Chicago, and Seattle.

Sun Belt markets continued to attract capital due to population growth, logistics infrastructure, and retail demand, while select Midwest markets gained attention for yield opportunities following faster repricing.

Market dispersion

CRE Daily reported that secondary markets experienced improved liquidity earlier than primary markets, as pricing adjustments occurred more rapidly. Investors increasingly prioritized local fundamentals and lease terms over market prestige.

Sale-Leaseback Activity

Sale-leaseback transactions remained a significant component of net lease activity.

CBRE Research reported that sale-leaseback volume totaled $8.2 billion for the year ending Q3 2025, a 38 percent year-over-year increase. Q3 2025 activity declined 15 percent year over year, attributed to slower merger and acquisition activity during the quarter.

Sale-leasebacks accounted for 17 percent of all net lease transactions over the trailing year, up from 15 percent previously. Publications described sale-leasebacks as a continued capital strategy for corporate balance-sheet optimization rather than as opportunistic market timing.

Market Signals Entering 2026

Pricing behavior

CRE Daily and Connect CRE reported that bid-ask spreads across retail and industrial net lease assets had narrowed by late 2025. Buyers and sellers demonstrated greater alignment on pricing assumptions, supporting steadier deal flow.

Cap rate movement showed limited sensitivity to short-term Federal Reserve actions. Publications emphasized that pricing reflected lease structure, tenant credit, and asset use rather than expectations of rapid rate cuts.

Inventory and liquidity

Inventory levels remained elevated in single-tenant retail, providing buyers with broader choice sets. Despite higher supply, transaction velocity improved, with pricing reflecting current risk conditions.

No referenced publication projected aggressive cap rate compression entering 2026. Instead, research consistently described a market operating within a defined valuation range.

What Investors and Brokers Are Watching in 2026

Across publications, several themes consistently shaped expectations:

Lease rollover risk remains a primary underwriting concern.

Tenant credit differentiation continues to widen.

Retail net lease attracts private capital seeking predictable income.

Industrial net-lease pricing reflects normalization rather than a retreat.

Office net lease activity centers on yield discipline rather than recovery assumptions.

Momentum Built on Fundamentals

By the end of 2025, the net lease market had largely completed its repricing cycle and entered a phase defined by stability rather than speculation. Cap rates remained elevated relative to historical lows but showed limited volatility. Transaction activity improved as pricing expectations converged, particularly in segments supported by long-term leases and stronger tenant credit.

Private capital played a central role in sustaining liquidity, while institutional and REIT participation remained selective. Retail net lease continued to attract consistent demand, industrial pricing reflected normalization after prior compression, and office net lease activity concentrated around yield-driven underwriting.

Entering 2026, market conditions point toward continuity rather than inflection. Asset performance, lease structure, and tenant fundamentals continue to drive outcomes more than short-term macro signals. The environment favors disciplined evaluation, realistic pricing, and clarity around risk, reinforcing a market shaped less by momentum and more by fundamentals.