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B+E Research and Insights

Cap Rates in Commercial Real Estate: What Q3 2025 Data Means for Your Investment Strategy

B+E > B+E INSIGHTS > B+E Research and Insights > Cap Rates in Commercial Real Estate: What Q3 2025 Data Means for Your Investment Strategy
10/28/2025 By B+E

Cap Rates in Commercial Real Estate: What Q3 2025 Data Means for Your Investment Strategy

Understanding cap rates in commercial real estate goes beyond formulas—it’s about how supply, tenant demand, and macroeconomic shifts influence returns. Q3 2025 data shows that property inventory expanded while cap rates generally edged lower, creating new opportunities for investors with the right strategy. Whether you’re completing a 1031 exchange, considering a sale-leaseback, or evaluating your next single-tenant net-lease acquisition, this summary will help you navigate the latest market conditions with confidence.

This article summarizes insights from B+E’s Q3 2025 Net Lease Cap Rate Report. You can download the full report at the end of this article.

Whether you’re acquiring your first net lease asset or managing a diversified portfolio, today’s cap rate environment offers both clarity and opportunity.

Market Snapshot: Inventory Up, Cap Rates Down

After several quarters of limited supply, Q3 2025 brought a notable uptick in listings. Total net-lease inventory rose 7% quarter-over-quarter to 4,648 properties. The car wash and convenience store sectors drove much of this increase, with inventories surging 71% and 20%, respectively. The spike coincided with the July reinstatement of permanent 100% bonus depreciation—a major tax advantage for investors that quickly reignited interest in improvement-heavy assets eligible for accelerated write-offs. Other categories showing double-digit supply growth included auto parts, auto service, early learning, and banking properties.

At the same time, cap rates generally declined. Convenience stores, casual dining, QSRs, banks, big-box retailers, and car washes all saw cap-rate reductions, with the big-box sector posting the largest drop at 26 basis points (bps). Pharmacy, dollar store, and auto-service properties were exceptions, where cap rates ticked higher by 4–6 bps. The car wash sector was especially active—inventory reached 176 listings while the average cap rate fell 20 bps to 6.27%, the lowest since late 2023.

Retail Trends: Leaders and Laggards

The retail sector remains diverse. Convenience stores increased supply by 20% to 363 listings and saw cap rates inch down to 5.53%. QSR/fast-food properties—a cornerstone of many net-lease portfolios—grew 3% to 1,011 listings, with cap rates easing to 5.69%. Banks experienced a 15% increase in listings alongside a 2 bp cap-rate decline, while big-box retailers—though a smaller portion of the market—delivered the quarter’s largest cap-rate drop, down 26 bps to 6.48%.

By contrast, pharmacy listings remained flat but cap rates climbed 6 bps to 7.48%, reflecting heightened credit concerns following Rite Aid’s second bankruptcy and elevated rates for Walgreens. Dollar and discount stores saw supply dip 2%, with cap rates drifting up to 7.39%—still among the highest yields in retail.

Industrial & Specialty Insights

Demand for industrial outdoor storage (IOS) assets continued to climb, driven by e-commerce growth, supply-chain disruptions, and limited truck parking availability. Distribution property inventory rose 34% quarter-over-quarter, while average cap rates declined 22 bps to 6.66%. Manufacturing assets held flat in supply but saw cap rates rise to 7.58%, while warehouse listings dropped 18%, with cap rates slipping slightly to 6.90%.

In the specialty segment, results were mixed. Early learning listings rose 14% to 156 properties, yet cap rates increased by 10 bps to 6.97%. Dialysis properties posted a 9% supply increase and a 6 bp decline in cap rates, while urgent care inventory fell 12% with cap rates holding steady at 6.50%. For investors seeking diversification beyond traditional retail and industrial, these niche sectors continue to offer stable, income-generating opportunities.

Interest Rates & Economic Outlook: A Quarter of Volatility

Macro conditions remain a major driver of cap-rate movements. The 10-year U.S. Treasury yield fluctuated widely during Q3—starting at 4.26%, peaking at 4.50% on July 15, and bottoming out at 4.01% on September 11, before ending the quarter at 4.16%, about 10 bps lower than it began. Inflation accelerated to 2.9% in August, the highest since January, as tariff impacts rippled through the economy and investors reassessed long-term fundamentals.

In September, the Federal Reserve made its first rate cut of 2025, lowering the federal funds rate by 25 bps to 4.00%–4.25%. Policymakers remain split on further reductions—some foresee two additional cuts before year-end, while others expect persistent inflation and tariff pressures to keep long-term rates near 4%. Despite these crosswinds, the U.S. economy showed resilience, posting 3.8% GDP growth in Q2 2025.

Lower borrowing costs may bolster leveraged returns and sale-leaseback valuations, but volatility in yields could persist through year-end.

Tax Law & Policy: Bonus Depreciation and Opportunity Zones

The One Big Beautiful Bill Act, passed in July, reinstated permanent 100% bonus depreciation for qualifying assets placed in service after January 19, 2025. This change is particularly advantageous for car wash investments and other property types requiring significant improvements, allowing investors to deduct full costs immediately rather than over time. The policy shift has already spurred a surge of listings and compressed cap rates in key sectors.

Additionally, the Treasury and IRS approved 3,309 rural tracts under the updated Opportunity Zone program. The map is expected to shrink by roughly 20%, with a new set of zones launching January 1, 2027. For net-lease investors, these changes underscore the importance of location strategy—properties within designated zones can offer meaningful tax advantages and long-term upside.

Tenant Activity: Expansion and Consolidation

Corporate announcements in Q3 reflected shifting tenant dynamics across sectors:

  • AutoZone opened 141 new locations worldwide (90 in the U.S.), including expansion into “mega-hub” formats.
  • Starbucks announced plans to close 400+ stores while renovating over 1,000 locations, trimming company-operated sites by roughly 1%.
  • Salad and Go is closing 41 restaurants, mainly in Texas and Oklahoma.
  • Aldi launched a five-year, $9 billion expansion, converting 220 former Winn-Dixie and Harveys stores and opening 225 new locations this year.
  • Home Depot acquired GMS via SRS Distribution for $5.5 billion, while Lowe’s announced its planned $8.8 billion acquisition of Foundation Building Materials.
  • Tsunami Express Car Wash expanded through the acquisition of 53 Take 5 locations, bringing its total to 74 sites across nine states.
  • Rite Aid officially closed its remaining stores after filing for bankruptcy for the second time.

These developments highlight the need for investors to evaluate tenant credit and expansion strategies as key components of risk assessment.

Strategic Takeaways for Investors

1. Market Timing: Leverage Stable Cap Rates and Rising Supply

Cap-rate stability creates a relatively balanced environment—neither buyers nor sellers dominate. Supply growth in several high-yield sectors presents a window to selectively acquire assets at attractive yields. Focus on car wash and convenience store properties benefiting from bonus depreciation tailwinds, while pharmacy, dollar, and auto-service assets continue to offer elevated yields.
 When selling, consider 1031 exchanges or other tax-deferred strategies to preserve gains and reposition into sectors with stronger fundamentals.

2. Risk Assessment: Credit, Leases, and Geography

Tenant credit remains a crucial filter. The collapse of Rite Aid and select store closures across other chains show how quickly conditions can shift. Prioritize investment-grade guarantors and tenants with proven expansion plans like AutoZone and Aldi. Lease length and rent escalations should balance stability with upside potential. Properties in pro-business states or Opportunity Zones may deliver additional tax and growth advantages.

3. Tax Planning: Maximize Depreciation and Consider Sale-Leasebacks

The return of permanent 100% bonus depreciation reinforces the value of sale-leaseback transactions. Owner-operators can unlock equity by selling their real estate and leasing it back—capturing immediate deductions while maintaining operational control. Investors acquiring sale-leaseback deals can gain long-term, credit-backed leases with depreciation benefits that shelter income.

Consulting a tax advisor—or leveraging B+E’s Net Lease Guide—can help you determine whether a sale-leaseback or 1031 exchange structure best fits your investment goals.

Final Thoughts: Positioning for Q4 and Beyond

Q3 2025 underscored how quickly the net-lease landscape can evolve when tax policy and macroeconomic forces align. Inventory is up, cap rates are generally down, and bonus depreciation has injected new momentum into the car wash and convenience store sectors. Yet risks persist: inflation, tariffs, and tenant credit concerns could reintroduce volatility.

The most successful investors will stay agile—rotating into underpriced segments, focusing on high-quality tenants, and leveraging tax-efficient strategies to maximize returns.

B+E’s mission is to make net-lease investing accessible, transparent, and data-driven for every investor.

If you’re evaluating a car wash investment, exploring a sale-leaseback, or considering the advantages of a 1031 exchange, our brokers can provide personalized guidance backed by real-time market data.

👉 Download the full Q3 2025 Cap Rate Report for deeper insights—or contact us to discuss your investment strategy.

Download the Full Q3 2025 Report

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