Q1 2025 Net Lease Cap Rate Report

A few key highlights from the report: 

• Since the end of December, supply has decreased across several asset classes, with the biggest drops seen in casual dining, banking, and car wash sectors—down 12%, 12%, and 31%, respectively.
• Newly available listings make up 32% of the properties currently on the market.
• Retail cap rates have fallen across multiple sectors, with banks experiencing a 15 bp decrease and auto parts stores seeing a 9 bp drop. However, convenience stores saw an increase in cap rates, rising by 7 bps QoQ.
• FedEx and Amazon are key players in the industrial sector, with a total of 21 properties currently on the market.
  • FedEx has an average cap rate of 6.62% with a remaining term of 6.9 years, while Amazon has an average cap rate of 5.95% and an average term of 8.4 years.
• The 10-year U.S. Treasury yield saw notable volatility throughout the first quarter. It began the year at 4.57%, spiking to 4.80% by January 18. From there, the yield steadily declined, reaching a quarterly low of 4.18% on March 3. It then rose slightly to end the quarter at 4.25% on March 31. As of April 11, it has climbed back up to 4.49%.
  •  This volatility is largely driven by uncertainty surrounding high tariffs, which have heightened concerns about a potential U.S. recession and the tariffs’ broader impact on global trade and domestic pricing.
  • Rising inflation expectations have continued to put upward pressure on Treasury yields. On April 14, the Federal Reserve Bank of New York released data indicating that households expect higher inflation in the short term, while medium-term expectations remained steady and long-term expectations declined slightly. Additionally, outlooks for unemployment, job security, and earnings growth have worsened.
• The Fed’s most recent rate cut occurred in December, keeping the target borrowing range between 4.25% and 4.50%. While a 50-basis point cut is projected for this year, the timing remains uncertain as the Fed continues to balance its dual mandate of maintaining full employment and controlling inflation.
• Congress is expected to reinstate 100% bonus depreciation later this year, following President Trump’s announcement prioritizing the restoration of key TCJA provisions. Currently at 40% for 2025 and set to decline to 20% in 2026 before phasing out in 2027, restoring full bonus depreciation could boost capital investment, spur economic growth, and improve cash flow for businesses.
• The U.S. dollar has dropped 9% since mid-January, reaching a three-year low and raising concerns about investor confidence amid President Trump’s trade policies. The decline has contributed to market volatility, with sell-offs in stocks and Treasuries. According to CBS News, experts suggest the drop reflects prior overvaluation rather than fundamental economic weakness.

Download the full report for details.