Why sale-leaseback cap rates sit above the net lease averages

An investor looking at a sale-leaseback usually arrives with a benchmark in mind, and the benchmark does not match. The quarterly net lease surveys report cap rates in the high sixes. The sale-leaseback in front of them is priced closer to eight. The gap is real, it is not a pricing error, and understanding it is most of what separates a good comparison from a bad one.

What the published surveys measure

Brokered inventory. The Boulder Group's quarterly survey put overall single-tenant net lease cap rates at 6.82% in the second quarter of 2026, with retail at 6.60%, industrial at 7.25% and office at 7.90%. That data reflects what is trading on the open market, which skews heavily toward corporate retail: rated tenants, standardised buildings, often sold out of portfolios by brokers to a deep pool of buyers. It is a useful benchmark for exactly that asset.

Why a sale-leaseback is a different asset

It is created rather than traded. The tenant is a private operating business that already owned the building and decided to stay in it, signing a long lease to release capital for something else. Most such companies carry no credit rating, because most private companies never need one. The building is usually purpose-built for how that business works, and the transaction is a single asset rather than a slice of a portfolio.

Where the spread comes from

Three things, mostly. There is no rating agency opinion to lean on, so the buyer has to form their own view of the tenant. The property is specialised, which is what makes it valuable to this tenant and harder to re-let to the next one. And it is one asset, so there is no portfolio to spread a bad outcome across. Each of those is a real risk, and the wider cap rate is the compensation for taking them.

A wider cap rate is not a worse asset

It is a different one, priced for a risk that happens to be legible. A credit rating summarises a large public balance sheet in a letter. It does not tell you whether the tenant can operate anywhere else, how much headroom the rent has against earnings, or what happens to that business if it loses the site. Those things are knowable on a sale-leaseback in a way they often are not on a brokered deal, because underwriting the operating business is the work. The yield is higher and the risk is more visible, which is not a trade every investor wants but is a coherent one.

What actually moves the number

Pricing depends on the rent, the tenant and the market. Rent coverage is the first test: how many times the tenant's earnings cover the rent, and a structure that does not clear it comfortably should not be done at any cap rate. Then how central the building is to producing revenue, the length and terms of the lease, the property type, and the market the asset sits in. Our own model treats anything outside roughly 4% to 15% as a figure to question rather than to price.

What to compare it to

Not the survey average, unless you are buying survey-average assets. Compare a sale-leaseback to another single asset with a private tenant, a specialised building and no guarantee, and the pricing stops looking generous. Compare it to a rated pharmacy in a portfolio and of course it looks wide, because you are comparing two different investments that happen to share a lease structure.

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