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Net Lease Guide B+E Research and Insights

Cap Rates in Commercial Real Estate: What Q2 2025 Data Means for Your Investment Strategy

B+E > B+E INSIGHTS > Net Lease Guide > Cap Rates in Commercial Real Estate: What Q2 2025 Data Means for Your Investment Strategy
08/07/2025 By B+E

Cap Rates in Commercial Real Estate: What Q2 2025 Data Means for Your Investment Strategy

Understanding cap rates in commercial real estate goes beyond formulas—it’s about how shifts in the market influence your returns. With Q2 2025 data pointing to renewed stability after recent volatility, this is an opportune time to reassess your portfolio strategy.

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

Download the Q2 2025 Cap Rate Report

Market Snapshot: Cap Rates in Q2 2025

The Q2 2025 market shows a leveling after years of cap rate swings. Here’s what’s happening by sector:

Retail Trends

Retail cap rates largely stabilized this quarter:

  • Convenience stores: Held steady at 5.57%
  • QSR (Quick-Service Restaurants): Up 2 basis points (bps) to 5.71%
  • Grocery: Down 3 bps to 5.90%

Pharmacies, however, saw the most dramatic shift:

  • Cap rates rose 43 bps to 7.42%
  • Rite Aid assets averaged 8.16% amid bankruptcy proceedings
  • Walgreens cap rates climbed to 7.74% due to credit concerns and ownership changes

These properties are often sold at elevated cap rates exceeding 8%, 9%, or even 10%. Still, many occupy high-visibility corners in dense retail corridors—ideal for repositioning into multi-tenant retail, medical, or QSR formats.

Industrial Insights

E-commerce infrastructure remains a bright spot:

  • FedEx: 6.43% average cap rate, down 19 bps from Q1
  • Amazon: 5.69% cap rate, down 26 bps

These trends reflect strong investor demand and confidence in logistics-heavy tenants with national reach and long-term leases.

Car Wash Update

Inventory for net lease car washes dropped 26% since Q1, with only 103 listings remaining. The average cap rate declined 11 bps to 6.48%.

With 100% bonus depreciation now permanent and 70% of annual transactions historically occurring in Q3 and Q4, this sector is positioned for heightened investor demand in the second half of 2025.

Interest Rates & Cap Rate Stability

The 10-year Treasury yield remained stable, ending Q2 at 4.23%, just 2 bps below Q1’s 4.25%. Despite fluctuations between 3.99% and 4.60%, this relative stability has helped anchor cap rates.

Supporting macro trends:

  • Inflation steady at 2.4% (down from 2.9% in 2024)
  • Unemployment slightly above 4%
  • Market expects no change at July 30 FOMC meeting

The takeaway: With interest rate volatility easing, cap rates have stabilized, showing only single-digit bps changes—far calmer than the double-digit increases seen throughout 2024.

Cap Rate Performance by Asset Class

High-Yield: Dollar Stores & Pharmacies

  • Dollar Stores: Averaging 7.35% (up 6 bps), offering recession-resilient tenants and long-term leases. Dollar General leads with 412 listings.
  • Pharmacies: Walgreens at 7.74%, CVS at 6.58%. The spread reflects tenant credit quality and market confidence.

Premium Assets: Grocery & QSR

  • Whole Foods: 5.00%
  • Trader Joe’s: 4.75%
  • Chick-fil-A: 4.33%
  • McDonald’s: 4.18%

These tenants command low cap rates due to strong credit, essential services, and limited prime market supply.

Emerging Sectors: Car Wash & Early Learning

  • Car Washes: 6.48% average with permanent bonus depreciation
  • Early Learning Centers: 6.87% average, driven by demographic demand and long-term leases

Tax Law Changes: What Investors Need to Know

Tax Law Changes Shaping Strategy

The recently passed One Big Beautiful Bill Act (OBBBA) introduces powerful tax incentives:

  • 100% Bonus Depreciation reinstated for assets placed in service after Jan 19, 2025
  • Qualified Production Property (QPP): Offers 100% deductions on newly constructed industrial facilities for manufacturing use
  • Opportunity Zones: Now permanent, with new zones selected every 10 years starting July 2026
  • SALT Cap: Temporarily raised to $40,000 (2026–2029), adjusted for inflation, before returning to $10,000 in 2030

These provisions support industrial development and improve after-tax returns across sectors.

Strategic Takeaways for Investors

Market Timing

Cap rate stability creates a neutral environment—neither buyers nor sellers dominate. This favors:

  • Selective acquisitions: Focus on corner sites, expansion-oriented tenants, or tax-advantaged properties
  • Portfolio repositioning: Upgrade into primary markets while spreads are compressed
  • Sector rotation: Shift into underpriced segments with improving fundamentals

Risk Assessment

  • Tenant Credit: Prioritize investment-grade guarantors and market-dominant brands
  • Lease Terms: Balance stability (long terms) with upside potential (rent bumps, flexibility)
  • Geography: Less critical than tenant and sector performance, but still consider tax climates and demographic tailwinds

Outlook for Late 2025

Expect continued stability barring economic shocks. Influencing factors include:

Stabilizers:

  • Interest rates likely to hold
  • Inflation within target range
  • Tenant fundamentals improving

Risks:

  • Tariff effects on costs
  • Rising stress among overleveraged tenants
  • Potential oversupply in hot sectors

The smart move? Target select assets with strong tenant credit, favorable lease terms, and exposure to tax incentives or redevelopment potential.

Final Thoughts

In today’s net lease market, the best returns go to those who act on insight—not instinct. Cap rates may be stable, but strategic selection is more critical than ever.

Looking to align your next investment with the trends shaping Q3 and beyond? Download our full Q2 2025 Cap Rate Report or connect with a B+E broker for tailored market guidance.

Download the Full Q2 2025 Report

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