Ground Lease Cap Rates: Why Land Leases Trade So Low
Ground leases to McDonald's and Chick-fil-A had asking cap rates of 4.45% in Q2 2026, the lowest in net lease. How ground leases work and why buyers accept the yield.
By the CapRateCalculator.co team
Ground lease cap rates are the lowest in net lease real estate. The Boulder Group’s second-quarter 2026 report put the asking cap rate on McDonald’s and Chick-fil-A ground leases at 4.45%, compared with a 6.92% median for single-tenant net lease overall in the third quarter. That benchmark covers premium quick-service restaurant tenants. Ground leases to weaker tenants trade at higher cap rates.
Ground lease vs net lease cap rates
| Type | Asking cap rate | Source |
|---|---|---|
| McDonald’s and Chick-fil-A ground leases | 4.45% | Boulder Group, Q2 2026 |
| All single-tenant net lease | 6.92% median | Boulder Group, Q3 2026 |
How a ground lease works
The investor owns the land and leases it to a tenant, who builds and owns the building on it. The tenant pays ground rent and all the costs of the building: taxes on the improvements, insurance, maintenance. The landowner’s NOI is essentially the ground rent.
Ground leases often run 20 years or more with renewal options. When the lease ends, the building frequently reverts to the landowner unless the lease says otherwise.
Why buyers accept such a low yield
If the tenant stops paying, the landowner can take back land with a working restaurant on it, which is easy to re-lease. That residual value protects the investor in a way a building lease does not. There are no building expenses and no capital spending. For a strong national tenant, the income is close to risk free, so buyers price it near bond yields.
Value at ground lease cap rates
| Cap rate | Value of $120,000 ground rent |
|---|---|
| 4.45% | $2,697,000 |
| 6.92% | $1,734,000 |
The same rent is worth about $960,000 more as a premium ground lease than at the net lease average.
What moves a ground lease cap rate
Tenant credit and brand. Corporate-guaranteed leases to the strongest restaurant brands sit at the bottom.
Rent increases. Regular bumps, often every five years, lower the cap rate.
Term remaining and land value. A short remaining term puts more weight on the land and building at expiration.
The net lease cap rates guide covers building leases, and cap rates by property type has the wider comparison.
Source: The Boulder Group, Single Tenant Net Lease Report Q2 2026.
Frequently asked questions
What is a typical ground lease cap rate?
The best-known benchmark is quick-service restaurant ground leases. The Boulder Group put the asking cap rate for McDonald's and Chick-fil-A ground leases at 4.45% in the second quarter of 2026, the lowest in the net lease sector. Ground leases to weaker tenants trade higher.
Why are ground lease cap rates lower than NNN cap rates?
The landowner owns only the land, and the tenant builds, owns and maintains the building. If the tenant leaves or defaults, the landowner keeps the land and often the building on it. That residual protection, plus no building expenses, makes the income safer than a regular net lease.
What happens at the end of a ground lease?
It depends on the lease. Often the building reverts to the landowner when the lease ends, unless the tenant renews or is required to demolish it. That reversion is part of why ground leases trade at low cap rates.