Feller, Harf, and Team Written by: BJ Feller | Senior Vice President & Managing Director | bfeller@northmarq.com
Net Takeaways with Feller, Harf, and Team
March 2025 Market Commentary Written by: BJ Feller | Senior Vice President & Managing Director | bfeller@northmarq.com
Cap Rates: The Market Says Stability—The Data Says Otherwise If you’ve been listening to the industry chatter, you’d think cap rates have stabilized. A nice, tidy narrative. Unfortunately, it’s wrong. Here’s what’s really happening:
•Cap rates on new listings appear flat. •Cap rates on closed deals are still rising.
•Cap rates on terminated deals? Jumping even higher. The market isn’t stabilizing—it’s splitting in two.
The reason? Selective selling. We ran the numbers across $28 billion in NNN inventory and found that the high-cap, high-risk deals—the ones that should be driving cap rates upward—aren’t making it to market. Instead, they’re quietly disappearing, either getting pulled or never listed in the first place.
NNN Insights by Bryn Feller
6.60% 6.40% 6.20% 6.00% 5.80% 5.60% 5.40% 5.20% 5.00% Jan 22 Apr 22 Jul 22 Oct 22 Jan 23 Apr 23 Jul 23 Oct 23 Jan 24 Apr 24 Jul 24 Oct 24 Jan 25 5.66% 5.88% 6.32% 6.41% NET LEASE CAP RATES ARE FALLING: BUT NOT WHY YOU THINK
2024 NNN CAP RATES: CLOSED VS. TERMINATED VS. ADDED 6.67%
Avg Cap of New to Market Deals Avg Cap of Terminated Deals Closed Transactions Avg List Cap
6.80% 6.70% 6.60% 6.50% 6.40% 6.20% 6.10% 6.00% 5.90%
Jan 22
Apr 22
Jul 22
Oct 22
Net Takeaways with Feller, Harf, and Team
March 2025 Market Commentary Written by: BJ Feller | Senior Vice President & Managing Director | bfeller@northmarq.com
On paper, cap rates look stable. In reality, the composition of what’s selling has changed. The only deals trading are the ones investors actually want—long-term leases, bulletproof tenants, prime locations. So when you see data that says “cap rates have peaked,” take a beat. The reality is that cap rates are still rising on transactions that close, and weaker deals are simply opting out of the game. NNN Inventory Has Doubled—And No One’s Tracking It Here’s a fun fact: Over the past 36 months, NNN retail inventory has skyrocketed from $13.1 billion to $28.0 billion. But if you go looking for a consolidated dataset from major research firms? Good luck. So we built it ourselves. $30B $28B $26B $24B $22B $20B $18B $16B $14B $12B $10B Jan 22 Apr 22 Jul 22 Oct 22 Jan 23 Apr 23 Jul 23 Oct 23 Jan 24 Apr 24 Jul 24 Oct 24 $20.1B $22.2B $28.0B NET LEASE CAP RATES ARE FALLING: BUT NOT WHY YOU THINK $13.1B What we’re seeing: •More product than ever is hitting the market •Transaction volume hasn’t kept pace. •More deals are sitting, more sellers are pulling back. The industry is treating this like a normal market slowdown. It’s not. It’s an inventory explosion, and it’s reshaping liquidity in real-time. The days of a “just list it and it will trade” mentality? Gone. The Economic Crosswinds: Interest Rates, Consumer Sentiment, and Walmart’s Reality Check If cap rates are the market’s heartbeat, interest rates are the blood pressure monitor. And right now, inflation is kicking rates right back up. •Inflation just reaccelerated. Not what the Fed wanted to see. •Consumer sentiment just dropped to a 4-year low. Also not great. •Walmart’s earnings confirmed that consumers are pulling back on discretionary spending. None of these bode well for leveraged acquisitions, and none of them suggest that rate cuts are around the corner. For those waiting on 5% money to come back: pack a lunch. NNN Insights by Bryn Feller
Net Takeaways with Feller, Harf, and Team
March 2025 Market Commentary Written by: BJ Feller | Senior Vice President & Managing Director | bfeller@northmarq.com
NNN Insights by Bryn Feller
UNIVERSITY OF MICHIGAN CONSUMER SENTIMENT
1Y 3Y 5Y 10Y MAX
78
75
72
69
66
Feb Mar
Apr
May Jun
Jul
Aug Sep Oct
Nov Dec 2025 Feb
Value Chg Chg%
Why Walmart’s Earnings Matter for Developers & Institutional Owners Walmart is the most powerful economic indicator that isn’t on the Fed’s dashboard. If middle America is struggling, Walmart knows before anyone else. And their latest earnings? A study in adaptation. •Grocery is carrying the business. People still need to eat. •Discretionary spending? Weak. Not great news for apparel-heavy retail landlords. •E-commerce is their secret weapon. If you don’t have a tenant with an omnichannel strategy, start asking harder questions. For net lease, this means: •Grocery-anchored retail is still king. •Retailers selling wants over needs are feeling the squeeze. •If your tenant roster leans into discretionary, start stress testing those renewal assumptions. Final Takeaways: What the Smart Money is Doing Now In times like this, capital flows toward quality and certainty—and that’s exactly what’s happening in net lease. •Top-tier locations, credit tenants, long leases? They still trade. •Second-tier assets? Liquidity is drying up. Sellers: If your asset isn’t A+ caliber, the market isn’t going to reward you for just being “realistic.” The only thing that’s moving are deals that check every box. Buyers: If you’re waiting for asking cap rates to climb much higher, you might be waiting a while. The data shows that sellers are holding firm—rather than lowering prices, they’re pulling higher-cap deals from the market. As a result, the inventory that’s actually available is skewing more aggressively priced. This market isn’t about patience. It’s about positioning. If you’re on the right side of the bifurcation, you’re winning. If you’re not—you’re waiting. LET’S TALK.
Mark Lovering Associate Vice President mlovering@northmarq. com
Isaiah Harf Regional Managing Director iharf@northmarq.com
BJ Feller Senior Vice President & Managing Director bfeller@northmarq.com
Christian Tremblay Vice President ctremblay@northmarq.com
Blaise Bennett Associate Vice President bbennett@northmarq.com
Josh Dicker Senior Associate jdicker@northmarq.com
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