Colorado-Real-Estate-Journal_510970

INSIDE Investors lean on the oldest rule in the book: The best locations win the day Small format Assets must accommodate hybrid retail to maintain competitive advantage Hybrid retail PAGE 15 February 2026 PAGE 7 Retail is dynamic and has always found ways to evolve through challenging times Lending landscape PAGE 10 T he single-tenant net lease investment market has entered a phase increasingly defined by credit quality and asset-level risk, rather than broad movements in interest rates. As illustrated in the chart, cap rates across top-, mid- and bottom-tier retail tenants have diverged over time, reflecting a maturing market where stability and creditworthi- ness impact pricing at a higher level than ever before. This trend is influ- enced by an increasingly narrow and selective buyer pool, consist- ing mostly of private investors who value predictable, stable income and are less likely to chase yield than in prior years. After a long period of cap rate compression that continued through the pandemic era, the STNL retail sector experienced a meaningful pric- ing shift, as higher borrowing costs and macroeco- nomic uncertainty reshaped investor expectations. Since then, however, the market has largely recalibrated. By fourth-quarter 2024 and into 2025, cap rates stabi- lized across most credit tiers, sig- naling that the bulk of the repricing cycle is complete. 2 What stands out most clearly in the data is the widening spread between tenant credit tiers. Deals leased to national retailers with strong balance sheets and long remaining lease terms continue to command aggressive cap rates upon sale, reinforcing their charac- terization as stable, low-risk invest- ments. On the other hand, deals leased to smaller franchisees and lesser known regional or local ten- ants consistently trade at higher yields, compensating investors for increased credit risk, lease rollover exposure, and re-tenanting uncer- tainty. 3 This is further cemented in the data: The typical spread between top credit and lower-qual- ity assets, historically around 100 basis points, stretched to about 140 bps in 2025. Since last July, our team has sold eight deals leased to national coffee users, with two more under con- tract. When you separate the comp set to show cap rate comparisons between the new corporate deals vs. smaller franchisee deals, we see this trend popping up in real time. For example, there was a 135-basis point spread between our lowest cap rate corporate deal – a Dutch Bros in Grand Junction that traded for a 5.15% cap rate – and our high- est cap rate long-term franchise deal. This change is a by-product of a James Rassenfoss Senior director, investments, Marcus & Millichap Please see Rassenfoss, Page 18 Single-tenant retail cap rates enter a risk-driven era Dutch Bros in Grand Junction