The cap rate math is the same for commercial as it is for residential: NOI divided by purchase price. But the range of what counts as “good” is much wider, and the reasons why are worth understanding before you price a deal.

For the residential baseline, see What Is a Good Cap Rate for Rental Property. This article focuses entirely on commercial asset classes and what separates their pricing from residential.

Why Commercial Cap Rates Behave Differently

Residential cap rates compress and expand largely based on supply, demand, and interest rates. Commercial cap rates do too, but they also respond strongly to things that do not apply to a single-family rental:

Lease structure. A NNN lease pushes operating expenses to the tenant, making owner cash flow much more predictable. A gross lease absorbs all operating costs. That difference alone can justify a 75–150 basis point cap rate gap between two otherwise identical buildings.
Tenant credit. A national retailer on a 10-year NNN lease is functionally a bond with real estate collateral. An unvetted local business on a month-to-month is not. Investors price that distinction directly into the cap rate.
Lease term remaining. A building with 12 years left on its primary lease trades tighter than the same building with 2 years remaining. Near-term rollover risk is a cap rate expander.
Vacancy. Commercial vacancy is binary in a way residential vacancy is not. One empty suite in a four-unit flex building can gut your NOI completely. Stabilized assets trade tighter than value-add assets for this reason.

Cap Rate = NOI ÷ Purchase Price

2026 Cap Rate Benchmarks by Asset Class

These are broad reference ranges for stabilized, properly leased assets in functioning markets. Value-add or distressed properties trade wider.

Asset Class	2026 Cap Rate Range	Key Driver
NNN retail (national credit tenant)	4.5%–6.0%	Tenant credit + lease term
Industrial / light warehouse	5.0%–6.5%	Demand from e-commerce and logistics
Self-storage (stabilized)	5.5%–7.5%	Occupancy quality and market oversupply risk
Multifamily (5+ units)	4.5%–6.5%	Market class and location
Flex / small-bay commercial	6.5%–9.0%	Lease structure and tenant diversity
Neighborhood retail (multi-tenant)	6.5%–8.5%	Anchor quality and lease rollover
Office (suburban)	7.0%–11.0%+	Vacancy risk and remote work impact

Asset Class Breakdown

Self-Storage

Self-storage has been one of the more consistent commercial asset classes over the past decade, with recession-resilient demand and low operational overhead. Stabilized facilities in strong suburban markets have traded in the mid-5% to low-7% range. Secondary and tertiary markets, or facilities with meaningful climate-controlled exposure in oversupplied areas, push toward 7.5%–9%.

The key storage-specific factor is the distinction between physical occupancy (how many units are rented) and economic occupancy (how much of the potential rent is actually collected). A facility advertising 92% occupancy but running heavy concessions or weak delinquency control can have economic occupancy of 83%. That gap compresses the effective cap rate on actual collections — not the headline number.

For a full storage acquisition framework, see How to Analyze a Self-Storage Acquisition.

Core suburban storage

5.5%–6.5%

Secondary market storage

6.5%–7.5%

Tertiary / new supply risk

7.5%–9.0%+

Flex Space and Small-Bay Retail

Flex and small-bay storefront deals are priced wider than most other commercial asset classes because they carry more operational complexity. Multi-tenant occupancy, local business tenants (lower credit), shorter leases, and tenant improvement obligations all contribute to the premium.

A well-leased flex building with NNN leases and a stable tenant mix can trade in the 6.5%–7.5% range. A partially vacant building with a vanilla shell suite and gross leases might need to clear 8.5%–9%+ to justify the lease-up risk. The condition of the space directly affects what cap rate the market will accept.

For the full underwriting framework, see How to Analyze a Flex Space Investment.

Stabilized NNN flex

6.5%–7.5%

Mixed lease / value-add

7.5%–8.5%

Vacancy or shell condition

8.5%–10%+

NNN Retail (Single-Tenant Net Lease)

Single-tenant NNN properties leased to investment-grade national tenants — think pharmacy chains, fast food, dollar stores — compress to some of the lowest cap rates in commercial real estate. Investors are effectively pricing the lease, not the building. A 15-year absolute NNN lease with a 10% rent bump every 5 years from a creditworthy tenant is very close to a bond.

The pricing risk is at expiration: when a NNN lease rolls, the “dark” risk (tenant vacates the purpose-built building) can be severe. Properties where the building has limited alternative use if the tenant leaves are priced wider to compensate for that residual risk.

Investment grade / long-term

4.5%–5.5%

Local credit / mid-term

5.5%–7.0%

Short remaining term

7.0%–8.5%+

Industrial and Light Warehouse

Industrial has been the strongest commercial category for the past several years, driven by e-commerce fulfillment, near-shoring, and last-mile logistics demand. Cap rates have compressed significantly from 2019 levels. Well-located light industrial and warehouse in major logistics corridors can trade near 5%. Secondary or functionally obsolete buildings price wider.

Office

Office is the outlier in 2026. Remote and hybrid work patterns have structurally reduced demand for traditional office space in most markets, and vacancy rates remain elevated nearly everywhere outside of premium Class A and life sciences space. Cap rates have expanded to reflect this, with suburban office now pricing at 7%–11%+ depending on lease term and tenant retention. Distressed assets sell at implied cap rates well above that, or are being converted to alternative uses.

The Cap Rate / Debt Spread: How Commercial Deals Actually Work

In residential investing, the question is whether cash flow covers the mortgage. In commercial, investors also watch the spread between the cap rate and the prevailing debt rate — because that spread determines whether leverage helps or hurts.

Scenario	Cap Rate	Loan Rate	Spread	Effect of Leverage
Positive leverage	8.0%	6.5%	+150 bps	Debt increases equity return
Neutral leverage	7.0%	7.0%	0 bps	Debt neither helps nor hurts
Negative leverage	5.5%	7.0%	−150 bps	Debt reduces equity return

A storage facility at 8% in a secondary market with 6.5% debt is strongly positive leverage — your equity earns more than the unlevered yield. A NNN retail strip at 5.5% financed at 7% is negative leverage — you would earn more by paying all cash. Most commercial buyers today watch this spread carefully, which is part of why NNN pricing has softened from its 2021–22 lows.

Positive vs Negative Leverage — Same Asset, Two Scenarios

Leverage Matters

Item	Positive Leverage (storage)	Negative Leverage (NNN)
Purchase price	$3,000,000	$3,000,000
Cap rate	8.0%	5.5%
NOI	$240,000	$165,000
Debt (70% LTV @ 6.75%)	−$141,000	−$141,000
Annual cash flow	$99,000	$24,000
Cash-on-cash return	11.0%	2.7%

Both use 30% equity ($900K). Same debt terms. The difference is cap rate spread over debt cost. The NNN deal may still pencil on appreciation or credit quality — but the cash-on-cash is thin.

What Compresses a Commercial Cap Rate

Investors accept a lower yield — tighter cap rate — when the income is more predictable and the risk is lower. The main factors:

Factor	Cap Rate Effect	Why
Long remaining lease term (10+ years)	Compresses 50–150 bps	Income is locked in; rollover risk is low
National / investment-grade tenant	Compresses 50–200 bps	Tenant credit removes default risk
NNN vs gross lease	Compresses 75–150 bps	Owner is not absorbing operating cost risk
Core market / infill location	Compresses 50–100 bps	Replacement cost and demand support value
New construction vs older building	Compresses 25–75 bps	Lower deferred maintenance risk

How DealForge Handles Commercial Cap Rates

DealForge uses cap rate in context — not as a standalone pass/fail number. For commercial deals, the analyzer considers:

In-place NOI vs stabilized NOI (important for value-add assets)
Cap rate relative to local comp sales for the same asset class
Debt service coverage at current financing rates
Exit cap rate sensitivity — what does a 50 or 100 bps cap rate move do to your exit value?

Once you’ve landed on an asset class, finding markets where the numbers work is the next step. OppMap scores local markets for self-storage, flex space, and contractor bay opportunities — useful when you know the benchmarks but still need to find the deal.

Ready to run the numbers on your own deal?

Analyze a Commercial Deal in DealForge → →

Bottom Line

There is no single good cap rate for commercial real estate. A 6% cap rate is excellent for a storage deal in a strong market and poor for a vacant flex building with lease-up risk. The benchmark only makes sense when you know the asset class, the lease structure, the tenant quality, and the local comp set.

Start with the asset-class range, adjust for lease quality and tenant credit, then check the debt spread. If the cap rate clears your financing cost by a meaningful margin and the NOI is real, the deal has a foundation worth analyzing further.