Single-tenant net-lease (STNL/NNN) sales fell to one of their lowest quarterly totals in over a decade, but pricing indicators show the market may be stabilizing. Q2 2025 volume landed at $9.6B (−13.1% QoQ; −4.6% YoY), while cap rates edged only +3 bps to 6.93%. Industrial dominated activity, and spreads over Treasuries remain wide enough to support disciplined acquisitions.
📌 Key Highlights
Total Q2 volume: $9.6B (−13.1% QoQ; −4.6% YoY) — 2nd-lowest quarter in 10+ years.
Cap rates: 6.93% avg, +3 bps QoQ; +130 bps above 2022 trough.
Sector mix: Industrial $5.4B; Retail $2.2B; Office $1.9B.
Buyer composition (H1): Private ~50%; Institutional ~25%; REITs ~7%; International ~5%.
1. Pricing Dynamics
The modest +3 bps cap-rate move confirms that yields are flattening, not spiking. After 18 months of repricing, the bid-ask spread is narrowing. This is a critical inflection point: sellers are adjusting expectations, and buyers are willing to transact at slightly higher yields.
2. Liquidity & Transaction Flow
At $9.6B, liquidity remains thin compared to the last decade, but deal flow is increasingly selective. Industrial continues to command capital ($5.4B) thanks to long leases and stronger tenant credits. Retail ($2.2B) shows resilience in necessity-anchored centers. Office ($1.9B) still clears only with strong credits or premier locations.
3. Sector Divergence
Cap rates vary by sector and credit. Industrial trades are clearing on the strength of logistics and manufacturing tenants. Retail spreads reflect durable cash flows from grocers and necessity retail. Office yields are higher but concentrated in investment-grade single-tenant assets. Investors should parse comps carefully — one size does not fit all in NNN.
4. Execution Implications
With spreads to Treasuries still around 265 bps, buyers can achieve stable leveraged yields if they prioritize credit, lease term (WALT), and real estate fundamentals. However, lenders remain conservative: underwriting focuses on tenant coverage, residual value, and realistic exit caps. Execution risk today is less about pricing swings and more about tenant durability.
If I’m acquiring, I focus on IG credits with long duration and dirt that holds value. The cap-rate spread to Treasuries makes sense again — but only if the lease structure and location are bulletproof. Opportunistic office or non-credit retail only works at steep discounts.
📈Read-Through
Bid-ask is narrowing — more deals will close in H2 2025.
Cap rates stabilizing — discipline is rewarded, not speculation.
Credit first — tenant quality is the decisive variable.
Industrial & necessity retail remain the sweet spot; office is still niche.
Volume recovery: If spreads hold and rates ease, expect stronger sales activity into late 2025.
Cap-rate trajectory: Likely flat to modestly tighter if rate cuts materialize; upside capped by credit spreads.
Buyer mix: Private capital continues to dominate; watch for REITs to re-enter if public equity cost improves.
Sector signals: Industrial and retail maintain pricing power; watch distressed office for selective opportunities.
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