- Private investors now dominate the STNL market, accounting for 71% of total dollar volume through September 2025, as overall transaction volume rises 18% year to date.
- Cap rates remain elevated at 6.5%, a 12-year high, with growing premiums placed on top-credit tenants and long-term leases.
- Pricing is closely tied to lease term, with short leases (under 5 years) trading at significantly higher cap rates due to increased risk.
- Federal Reserve rate cuts and stabilized Treasury yields could support more deal activity in Q4 2025, widening the spread between STNL cap rates and benchmark rates.
Private Capital Leads The Comeback
The STNL retail market is rebounding as private investors take center stage amid easing inflation and improved pricing alignment, reports GlobeSt. According to Marcus & Millichap’s latest report, private buyers drove a 15% increase in their market share over the past 12 months. During the same period, institutional, REIT, and entity-level activity declined. Through Q3 2025, private capital made up 71% of dollar volume, followed by foreign buyers (10%) and REITs (9%).
Higher Cap Rates, But Premiums For Stability
While transaction activity is improving, cap rates remain elevated at 6.5%, continuing a 12-year high streak. However, demand for quality remains strong. Investors are paying a 140-basis-point premium for properties with top-credit tenants. This is up from the historic average of 100 basis points. The increase reflects a flight to safety and a preference for stable income.
Notably, cap rate compression between mid-tier and lower-tier tenants suggests a more cautious approach to risk. Value is now heavily concentrated at the top end of the credit spectrum.
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Lease Term Drives Pricing Strategy
Lease duration is another key pricing lever. Properties with fewer than five years remaining on the lease trade at an average cap rate of 7.7%, reflecting increased risk and limited rent upside. Assets with leases between 5 to 15 years trade at cap rates closer to the market average of 6.8%. Those with more than 15 years benefit from the lowest average cap rates at 6.1%. This signals strong investor appetite for long-term cash flow certainty.
Economic Outlook Could Boost Deal Flow
As of September 2025, the STNL cap rate spread over the 10-Year Treasury rose to 240 basis points from 200. SIf the Federal Reserve continues with rate cuts and Treasury yields soften, the spread could widen further. This would create additional room for deal-making in the final quarter of the year.
Why It Matters
Private investors are reshaping the STNL landscape, stepping in where institutional buyers have pulled back. As interest rates stabilize and capital markets thaw, renewed activity signals growing confidence in single-tenant retail. This is especially true for well-located, long-leased assets backed by strong tenants.
Momentum is expected to continue into 2026 as fundamentals improve and investor demand grows for stable, income-generating retail assets.
