Private Investors Fuel 2025 Growth In Single-Tenant Retail Market

Private investors are leading a rebound in the single-tenant net lease retail sector, with transaction volume up 18% year-over-year through Q3 2025.
Individual asset investments increased 15% year-over-year, while entity-level deals dropped sharply by 98%, largely due to fewer mergers.
Cap rate spreads widened between top-tier and lower-tier tenants, and longer lease terms continued to command premium pricing.
The average cap rate held at 6.5%, the highest level in over a decade, but remained stable despite broader market volatility.

Key Takeaways

A Rebound Year For STNL Retail

After sluggish activity in 2023 and 2024, the US STNL retail market experienced a notable resurgence in 2025, reports Marcus&Millichap. Transactions rose 18% and dollar volume 14% in 2025, showing improved alignment between single-tenant retail buyers and sellers.

Bar and line graph showing 2015–2025 single-tenant retail sales trends by transaction volume and dollar volume. 2025 data shows a rebound nearing 2021 levels.

Volume remained below the 2021 peak but exceeded all prior years, signaling a structural recovery in investor confidence.

The Private Investor Revival

Private capital played a pivotal role in 2025’s comeback. Private investors accounted for 71% of all transaction volume, significantly outweighing REITs (10%), institutions (9%), and foreign buyers (4%).

Buyer volume in 2025 was 17% below the 2022 peak but still surpassed all years prior to 2021.

Bar chart illustrating private investor dollar volume in single-tenant retail from 2000 to 2025, showing a post-2023 recovery trend.

Cap Rates: Risk VS. Reward

A critical theme in 2025 was risk-based pricing. The cap rate spread between top-tier and lower-tier tenants expanded to 140 basis points, up from the historical 100 basis point average. This reflects investor demand for stronger credit tenants amid uncertainty.

Line graph comparing cap rates from 2010 to 2025 across top-tier, mid-tier, and bottom-tier tenants in single-tenant retail.

Top-tier tenants: Cap rates decreased in 2025.
Mid-tier tenants: Cap rates inched closer to bottom-tier levels.
Bottom-tier tenants: Continued to yield the highest cap rates.

Lease Term Impacts Cap Rates

Lease length remained a key valuation metric:

<5 years remaining: Avg. cap rate of 7.7%
5–15 years remaining: 6.8%
>15 years remaining: 6.1%

Shorter lease terms demanded higher yields to offset rollover risk.

Horizontal bar chart showing cap rates based on lease term remaining: under 5 years, 5–15 years, and over 15 years. Shorter leases show higher yields.

Historical Yield Spread: A Tailwind?

As of September 2025, the cap rate spread over the 10-Year Treasury widened to 240 basis points, up from a recent low of 200 in 2022. This enhanced yield premium could continue supporting deal activity into 2026.

Line graph comparing average cap rate and 10-Year Treasury rate from 2002 to 2025, highlighting the widening spread in recent years.

Area chart showing historical cap rate to Treasury spread from 2002 to 2025, peaking during uncertain economic periods and settling in 2025.

What’s Next

Despite subdued portfolio and entity deals, a private capital rebound and better pricing alignment point to a positive outlook for STNL retail. According to Marcus & Millichap, investor appetite is expected to remain strong, especially for properties with long lease terms and creditworthy tenants, which continue to drive pricing premiums.