NNN Cap Rates in 2026: Complete Guide by Tenant Type, Market, and Credit Quality

What Drives NNN Cap Rates

A cap rate is fundamentally straightforward: Net Operating Income divided by Purchase Price. In single-tenant NNN (triple net) properties, the calculation becomes elegant because the tenant assumes responsibility for all operating expenses, taxes, insurance, and CAM charges. This means the NOI equals the base rent the tenant pays, stripped of landlord operating burdens.

Understanding what moves NNN cap rates is essential for investors evaluating returns and lenders sizing loans. Five primary drivers influence where cap rates settle in any given market:

• Tenant Credit Quality: Investment-grade corporate tenants (those with public credit ratings) command tighter cap rates because default risk is lower. A Chick-fil-A corporate ground lease trades at significantly lower cap rates than a franchisee-operated Burger King at the same location.
• Lease Term Remaining: Longer remaining lease terms reduce refinancing and tenant-replacement risk. A property with 20 years remaining on the lease will be priced at a tighter cap rate than an otherwise identical property with 7 years left.
• Rent Bump Schedule: Annual rent escalations (typically 2 to 3 percent) built into the lease reduce cap rate by 25 to 50 basis points compared to flat-rent leases. Escalations provide inflation protection and NOI growth.
• Property Location and Market Demand: Top-tier metropolitan markets (New York, Los Angeles, San Francisco, Chicago) sustain lower cap rates due to deeper investor pools and consistent demand. Rural locations with limited liquidity command 100 to 200 basis points higher cap rates.
• Alternative Asset Yields and Interest Rates: NNN cap rates move inversely with interest rates, but with a lag. When 10-year Treasury yields rise, investors demand higher cap rates to compensate. Simultaneously, competing yields on bonds, preferred stocks, and other fixed-income assets pressure cap rates upward.

In 2026, these drivers are in tension. Interest rates remain elevated relative to the 2020-2021 period, and new supply of build-to-suit NNN properties continues to modulate investor appetite. The result is a market in which cap rates have settled into a wider range than investors experienced during the low-rate environment of the prior decade.

Current Cap Rates by Tenant Category (2026)

NNN cap rates vary materially by tenant type, credit quality, and lease structure. The following ranges reflect market reality as of 2026 for well-leased, NNN-structured properties in secondary and tertiary markets. Tier 1 market properties will trade 50 to 100 basis points tighter; rural properties will be 75 to 150 basis points wider.

QSR and Restaurant

• Chick-fil-A (Corporate): 4.0 to 4.75%. Chick-fil-A corporate ground leases remain among the tightest in the NNN space due to exceptional credit quality, long lease terms (often 20+ years), and consistent annual rent bumps.
• McDonald's (Corporate Ground Lease): 4.25 to 5.0%. McDonald's corporate properties trade tight; franchisee-operated fee simple properties are 5.0 to 5.75% due to weaker credit and refinancing risk.
• Starbucks: 4.5 to 5.25%. Drive-through locations command a premium within this range. Walk-in-only Starbucks occupy the higher end.
• Taco Bell (Yum! Corporate): 5.0 to 5.75%. Yum! corporate guarantee lifts Taco Bell above franchisee-operated quick-service concepts.
• Burger King / Wendy's (Franchisee): 5.25 to 6.25%. Franchisee credit quality and lease terms drive wide range. Longer leases and stronger franchisees approach 5.25%; weaker credits or short-term leases approach 6.25%.
• Sonic / Arby's: 5.5 to 6.5%. These concepts occupy the middle-to-lower end of the QSR spectrum due to franchisee reliance and moderate credit quality.

Pharmacy

• CVS (Corporate): 5.0 to 6.25%. Range widens significantly based on lease term. 25-year ground leases trade at 5.0 to 5.75%; 10-year or shorter fee simple deals approach 6.25%.
• Walgreens (BB+ Credit): 5.5 to 6.75%. Walgreens' 2023 credit downgrade widened cap rates across the portfolio. Recent refinancing discussions and cost-cutting efforts have improved perception, but spreads remain elevated versus CVS.

Dollar Stores and Discount Retail

• Dollar General (BBB Corporate): 5.5 to 7.0%. Suburban Dollar General locations trade 5.5 to 6.5%; rural locations 6.75 to 7.0%. DG's consistent same-store sales and unit growth support relatively tight cap rates for the category.
• Dollar Tree / Family Dollar (BBB Corporate): 5.75 to 7.25%. Family Dollar store closures and integration challenges have widened the range; newer Family Dollar locations or consolidated Dollar Tree locations trade tighter.

Auto Parts and Service

• AutoZone (BBB): 5.25 to 6.25%. AutoZone's consistent profitability and market leadership keep cap rates relatively tight within the auto parts category.
• O'Reilly Auto Parts (BBB+): 5.25 to 6.0%. Slightly tighter than AutoZone due to superior credit metrics.
• Jiffy Lube / Firestone (Franchisee): 5.75 to 7.0%. Franchisee reliance and variable credit quality widen this range significantly.
• Discount Tire (Private): 5.5 to 6.5%. Discount Tire's private ownership and strong cash flow support a competitive cap rate despite lack of public credit.

Convenience and Gas

• 7-Eleven (Investment-Grade Parent): 4.5 to 5.5% for corporate properties; 5.5 to 7.0% for branded dealer locations. Parent company strength underpins tight corporate rates, but dealer-operated stores face higher refinancing risk.
• Circle K (Investment-Grade Parent): 5.0 to 6.0%. Similar dynamic to 7-Eleven; parent company support keeps rates competitive.

Fitness

• Life Time Fitness (Corporate): 5.5 to 6.5%. Premium positioning and strong membership economics support competitive cap rates.
• LA Fitness (Corporate): 5.75 to 6.5%.
• Planet Fitness (Franchisee): 6.0 to 7.0%. Franchisee structure and variable operational quality widen the range.

Financial Services

• Bank Branches (JPMorgan, Wells Fargo, BofA): 4.5 to 5.5%. Bank branch leases remain among the tightest due to investment-grade credit, though branch closures and contraction have slightly widened ranges in recent years. Prime downtown or high-traffic suburban locations trade tighter; secondary locations approach 5.5%.

How Market Tier Affects Cap Rates

Geographic market tier is one of the most potent cap rate determinants. Investor demand, replacement cost, and liquidity vary dramatically across market tiers.

• Tier 1 Markets (NYC, LA, SF, Chicago, Boston, Washington DC): Properties in these markets trade 50 to 100 basis points lower than the national average for the same tenant and lease structure. Institutional capital competes aggressively, resulting in cap rate compression.
• Tier 2 Markets (Dallas, Atlanta, Phoenix, Miami, Nashville, Austin, Denver): These high-growth metropolitan areas typically trade at or near national benchmarks for each tenant category. Strong population and job growth support tight cap rates without reaching Tier 1 premiums.
• Tier 3 Markets (Secondary metros like Des Moines, Memphis, Tucson, plus exurban rings around major metros): Cap rates typically run 75 to 150 basis points wider than national average. Investor pools are smaller and less competitive, resulting in wider spreads to compensate for illiquidity and market risk.
• Rural Markets: Properties in rural counties often trade 100 to 200 basis points wider than the same tenant in Tier 2 markets. Limited investor pools, longer holding periods, and reduced liquidity create a significant risk premium. Exit strategies become constrained, and finding qualified buyers requires extended marketing periods.

Lease Structure: How Deal Terms Move the Cap Rate

Two properties with identical tenants and locations can trade at materially different cap rates based on lease mechanics. Understanding these differences is critical for investors and essential for lenders evaluating refinance risk.

• Ground Lease vs Fee Simple: Ground lease structures typically command cap rates 25 to 50 basis points tighter than equivalent fee simple deals. The landlord retains land ownership and benefits from long-term appreciation while tenant bears all building and improvement risk. Ground leases appeal to conservative investors seeking stable income without capital-intensive building management.
• Remaining Lease Term: Properties with 15+ years remaining trade at benchmark cap rates for that tenant. Each year below 10 years remaining adds incrementally to cap rate. A McDonald's corporate property with 8 years left might trade at 4.75% versus 4.5% for an identical property with 15 years remaining. Leases below 5 years command a substantial refinancing risk premium.
• Rent Bump Schedule: Annual 2 to 3 percent escalations reduce cap rate by 25 to 50 basis points versus flat-rent leases. Escalations provide inflation protection and NOI growth; investors value this predictability.
• Absolute NNN vs Modified Gross: True triple-net leases (tenant pays all expenses) trade 25 to 75 basis points tighter than modified gross leases where the landlord retains some expense responsibility. Absolute NNN simplifies the landlord's role and removes operational risk.
• Corporate Guarantee vs Franchisee: A corporate-guaranteed lease is worth 50 to 150 basis points in cap rate spread compared to a franchisee-operated property. The credit profile difference is substantial. A corporate Wendy's and a franchisee Wendy's at the same location may differ by 100 basis points or more.

Cap Rates and Loan Sizing: The Math

Cap rates directly impact how much a property can be financed. This relationship is fundamental to structuring NNN acquisitions and refinances.

Consider this example: a property generating $100,000 in annual NOI. At a 5.0% cap rate, the purchase price is $2,000,000. At a 7.0% cap rate, the same $100,000 NO