FAQ · June 23, 2026 · Steven Owen
What is a good cap rate for an NNN retail property in Texas?
There is no single “good” cap rate — the right one fairly prices the risk. As of Q1 2026, single-tenant net-lease retail is asking roughly 6.55% on average nationally (The Boulder Group), and overall single-tenant net lease sits at 6.80%. In Texas, a strong investment-grade tenant with 10+ years of term typically trades around 5.5–7.0%, while franchisee-guaranteed, weaker-credit, or short-term deals price roughly 7.0–9%+. A 5.5% on a corporate McDonald’s ground lease and a 7.75% on a franchisee dollar store can both be good buys — because cap rate is a risk price, not a quality score.
Why “good” depends entirely on the risk
A cap rate is just first-year net operating income divided by price. Because an NNN tenant pays the taxes, insurance, and maintenance, that NOI is close to the rent — so the cap rate is really the market’s verdict on how safe that rent check is. A lower cap rate means the market trusts the income (and pays more for it); a higher cap rate means the market wants a discount for risk. Chasing the highest number is how investors end up owning a vacant box with a personal guarantee from a franchisee who has moved on. The goal is the right cap rate for the credit, term, and real estate — not the biggest.
Current NNN retail cap-rate ranges, dated and sourced
| Segment | Q1 2026 cap rate | Notes |
|---|---|---|
| All single-tenant net lease | ~6.80% | Down ~1 bp from Q4 2025; near multi-year tights |
| Net-lease retail (overall) | ~6.55% | Held roughly flat; retail supply down ~11% |
| QSR — corporate-guaranteed | ~5.82% | Franchisee-guaranteed QSR wider at ~6.80% |
| Trophy QSR ground leases | ~4.40–5.45% | McDonald’s ~4.40%, Chick-fil-A ~4.50%, Chipotle ~5.45%, Starbucks ~6.45% |
| Drug store (sector) | ~7.85% | CVS ~6.80%; Walgreens ~8.10% (credit overhang) |
| Dollar stores | ~6.75–8.65% | Dollar General ~6.75–8.50%; Family Dollar ~7.80–8.65% |
| Investment-grade tenants (general) | ~5.75–7.25% | AA–BBB- rated, corporate guarantee, long term |
| Sub-investment-grade / franchisee | ~7.25–9.25% | Unrated or franchisee guarantee; shorter term |
The headline of the 2026 market is a flight to credit quality: premium tenants with long remaining term command the tightest pricing and the deepest buyer pool, while weaker-credit and short-term deals sit longer and trade wider. The gap between a corporate guarantee and a franchisee guarantee on the same brand can be a full point of cap rate or more.
The five things that actually set the number
- Tenant credit. An investment-grade, rated tenant (Chase, Starbucks, corporate QSR) prices far tighter than an unrated operator. This is the single biggest driver.
- Guarantee. A corporate guarantee is worth materially more than a single-franchisee guarantee — same logo, different risk.
- Remaining lease term. A fresh 15-year lease prices tighter than one with three years of roll. Term is certainty, and certainty compresses cap rates.
- Rent escalations. Built-in bumps (e.g., 10% every five years, or annual increases) lower the cap rate a buyer will accept, because the income grows.
- Real estate & location. A hard corner with traffic and strong residual value — what the dirt and building are worth if the tenant ever leaves — protects the downside and tightens pricing.
What’s different about Texas
For the same tenant and term, Texas net-lease assets often price at or slightly inside national medians. The reasons are structural: no state income tax, sustained population and job growth, and heavy 1031 exchange demand from investors trading out of management-intensive property — all of which deepen the buyer pool for dependable Texas income. The flip side: Texas is a non-disclosure state, so sale prices are not part of the public record. There is no recorded comp database to pull a cap rate from; the real number comes from current listings, broker relationships, and deals you actually see. That makes a knowledgeable local read more valuable, not less — the “market cap rate” you find online is an asking-price average, and what a property truly trades at is a separate question.
What it looks like in Austin right now
Austin sharpens the Texas story. CoStar’s June 2026 Austin retail data puts the overall market cap rate at 6.4%, with deals over the trailing 12 months clearing anywhere from 3.9% to 9.0% depending on credit, term, and center type — the same risk spectrum, in one metro. Underpinning that pricing is genuinely scarce space: retail vacancy is just 3.4% (up modestly from 2.9% a year ago and still near historic lows), and Austin has delivered the most retail space as a share of inventory in the country for four straight years yet inventory grew only 1.3% — demand keeps pace with supply. Low vacancy and rising rents are what protect a net-lease owner’s residual value if a tenant ever leaves.
| Metric | Austin retail | Context |
|---|---|---|
| Market cap rate | 6.4% | 12-mo transactions ranged 3.9%–9.0% by credit/term |
| Avg sale price /SF | ~$330 (mkt $342) | Sales closed ~6.6% under asking; 94% leased at sale |
| Vacancy rate | 3.4% | Near historic lows; up from 2.9% a year ago |
| Market asking rent (NNN) | $31.21/SF | General retail ~$29.86; power centers ~$33.58 |
| Asking rent growth | 1.1% YoY | Normalizing from a ~3% long-run pace |
| Net absorption (12 mo) | 1.1M SF | Pipeline ~70% preleased — supply stays balanced |
For a single-tenant net-lease buyer, the takeaway is that Austin retail real estate is fundamentally tight, which supports both the income and the dirt underneath it — one reason quality Texas net-lease product prices toward the lower (more expensive) end of the national range.
What this means for you
- Buyers & 1031 investors: decide what you’re buying — income safety or yield — before you anchor on a number. If certainty is the point (often true for a 1031 exchange into passive income), pay the tighter cap for investment-grade credit and long term. If you want yield and can underwrite the credit, the 7.5–9% tier can be the better risk-adjusted buy. Mind your exchange clock; quality NNN product moves fast.
- Sellers: your cap rate is set by your tenant’s credit, your remaining term, and your escalations — not by what you paid. If you have term and a strong guarantee, you’re in the part of the market buyers are competing for. If term is short, addressing renewal before you list can be worth more than any marketing.
- Owners weighing a sale vs. hold: with credit cap rates near multi-year tights, a well-tenanted Texas NNN asset may be worth more today than the income alone suggests — worth a current valuation before you decide.
How SCORE reads a net-lease deal
Steven Owen underwrites NNN retail the way an engineer with an NYU Stern finance MBA would — pricing the tenant’s credit, reading the lease line by line (term, options, escalations, landlord obligations), and valuing the residual real estate, not just the logo on the building. SCORE represents Texas buyers and sellers across retail and net lease, markets to a 1,700+ developer and investor network, and sources on- and off-market product through our buy-box matching engine. These figures are refreshed quarterly.
Buying or selling a Texas NNN property?
Get a current, credit-specific read on cap rate and value — or tell us the net-lease deal you’re hunting for.
Book a consultation Tell us your buy boxFigures are directional and dated: national single-tenant net-lease benchmarks from The Boulder Group Net Lease Research Report (Q1 2026) and InvestmentGrade.com; Austin market figures from CoStar (Austin retail, June 23, 2026). Texas is a non-disclosure state; reported cap rates reflect asking and listing data, not recorded sale prices. This is general information, not investment, tax, or legal advice. Related: Retail / NNN · 1031 Exchange · Austin industrial cap rates.