While office and apartments fight over vacancy, one corner of commercial real estate is reporting buildings that are almost completely full. The net-lease REITs that wrapped up third-quarter earnings over the past two weeks posted occupancy at or above 98.8%, kept buying at cap rates near or above 7%, and in one case did more than nine of every ten deals as sale-leasebacks.
NNN REIT: 99.2% and climbing
NNN REIT reported on November 4 that portfolio occupancy reached 99.2%, up 10 basis points from the prior quarter and 170 basis points from a year earlier, with a weighted average remaining lease term of 10.1 years across 3,817 properties. Annualized base rent grew 6.8% to $974.0 million, and core funds from operations per share rose 5.9% to $0.90.
Pricing is the detail investors should notice. NNN closed $221.7 million of investments in the quarter at a 7.3% initial cash cap rate, with an average lease term of 19.6 years. At the same time it sold income-producing properties at an average 7.8% cap rate, recycling capital while it buys long leases. It also raised its 2026 disposition guidance to $160 million to $180 million. Chief executive Steve Horn pointed to $1.4 billion of available liquidity and said the company is ready for the opportunities that market volatility may create.
Realty Income: big checks, a new partner
Realty Income, the largest of the group, reported on November 2 that it invested $2.6 billion in the quarter, with its pro-rata share of $2.2 billion at an initial weighted average cash yield of 6.8%. Occupancy held at 98.8% across 15,536 properties leased to 1,842 clients in 96 industries. On properties it re-leased, it recaptured 103.5% of the prior rent.
The company raised its 2026 adjusted FFO guidance to $4.45 to $4.46 per share, reaffirmed a $10.0 billion investment target for the year, and expanded its private capital business into Europe through a joint venture with KKR backed by an initial €528.0 million investment.
Agree and Essential: retail and service tenants
Agree Realty, which reported on October 20, said its portfolio of 2,888 properties was about 99.8% leased. It invested about $357.7 million across 94 retail properties in the quarter and roughly $1.3 billion year to date. It also sold a $400 million bond at an all-in rate of 5.36% and raised its 2026 AFFO guidance to $4.58 to $4.59 per share.
Essential Properties Realty Trust, which reported on October 21, is the clearest read on the sale-leaseback market. It invested $342.2 million in the quarter at a 7.7% weighted average cash cap rate, and sale-leasebacks made up 91% of that volume, and 92% year to date. Its portfolio of 2,580 properties, mostly leased to service and experience businesses, was 99.6% leased. Chief executive Pete Mavoides said the company would keep its cap rates in line with the changing cost of capital.
Why sale-leasebacks are having a moment
For a business that owns its real estate, a sale-leaseback turns a building into cash without giving up the location, money that can fund growth or pay down debt. The REITs, in turn, get long leases with built-in rent increases. Essential's third-quarter deals carried an average lease term of 17.9 years and annual escalations of 2.3%, and 60% of the quarter's volume came from existing relationships.
The math works because the spread is positive. Realty Income said it funded this quarter's investments at a leverage-neutral spread of about 170 basis points. NNN buys at 7.3% while carrying a weighted average debt maturity of 9.8 years and only 2.3% floating-rate exposure. As long as REITs can raise capital below the yield on what they buy, the bid for single-tenant properties stays firm.
What it means for CRE investors and owners
Cap rates in the 7% range are the market. Public net-lease buyers are paying roughly 6.8% to 7.7% on new deals. Private sellers of single-tenant retail, auto service and similar properties should use those numbers as a reality check before setting an asking price.
Operating businesses have an alternative source of capital. Owner-occupiers facing refinancing or expansion needs can consider a sale-leaseback as a real option, especially if they can offer a long lease and financial reporting, which buyers like Essential require in every deal.
Occupancy is not the risk; tenant credit is. With portfolios above 99% leased, the swing factor is the health of individual tenants. Rent recapture above 100% at Realty Income shows that well-located boxes re-lease well when a tenant leaves.
Expect more selling by the REITs themselves. NNN raised its disposition target, and Agree raised its 2026 disposition range to $100 million to $150 million. That creates a steady supply of seasoned net-lease assets for private buyers, including 1031 exchange investors and smaller funds.
Sources
NNN REIT, Third Quarter 2026 Results (Nov 4, 2026)
Agree Realty, Third Quarter 2026 Results (Oct 20, 2026)
Essential Properties Realty Trust, Third Quarter 2026 Results (Oct 21, 2026), via Yahoo Finance
Published by The Basis. Research dates, source references and illustrative assumptions are retained from the original article.
