Net lease cap rates remained on stable path in Q4
Retail cap rates compressed modestly to 6.55% in 2025’s fourth quarter — a two basis point decline from Q3, according to a report from The Boulder Group, a Chicago-based investment real estate services firm.
In December, the Federal Reserve implemented its third rate cut of the year, lowering the target range by 25 basis points to 3.50% - 3.75%.
It was the third straight quarter of a single basis point increase for cap rates, which were largely unaffected in 2025 despite multiple rate cuts in the second half of the year, noted the report.
“The slight cap rate movement in the fourth quarter of 2025 illustrates continued pricing stability supported by improving buyer-seller alignment following a period of more significant cap rate adjustment in prior years," said Boulder Group partner Jimmy Goodman.
Retail inventory remained sparse, rising by just 1.1% in the quarter to 4,312 properties. Meanwhile, office space supply increased significantly by 8.2% to 685 properties, and industrial properties on the market grew by 5.6% to 713.
“Bid-ask spreads continued to tighten across all sectors, underscoring improved pricing agreement between buyers and sellers,” added Boulder Group senior VP John Feeney.
A bid-ask spread is the difference between the highest price a buyer will pay and the lowest price a seller will accept. A tighter spread indicates that the asset is liquid and trades frequently.
The report noted that the narrowing of the bid-ask spread reflects sustained investor demand for net lease assets, especially as projections for 2026 suggest a more measured pace from the Federal Reserve.
Market participants expect the Fed funds rate to potentially settle in the low-3% range by the end of 2026, which may encourage additional private buyers to enter the market amid potentially lower borrowing costs.
