"Triple net lease" and "NNN" are among the most-searched terms in commercial real estate, and the reason is simple: NNN properties are the closest thing to a hands-off, landlord-light investment in real estate. They're a favorite parking spot for 1031 exchange proceeds and out-of-state investors who want commercial-grade income without commercial-grade management.

What "triple net" actually means

In a triple net (NNN) lease, the tenant — not the landlord — pays the three major property expenses beyond rent: property taxes, building insurance, and common area maintenance. The landlord collects rent and has little to no operating responsibility, which is why NNN properties appeal to investors who want real estate income without becoming a hands-on operator. Most NNN deals involve a single tenant occupying the whole building — a drugstore, fast-food restaurant, auto parts store, or dollar store on a freestanding pad — under a long-term lease, often 10-20 years with built-in rent escalations.

Why NNN properties are popular with 1031 exchange buyers

A 1031 exchange lets an investor defer capital gains tax by rolling proceeds from a sold investment property into a new "like-kind" property. NNN properties are a common landing spot because they solve the exchange's tight timeline (45 days to identify a replacement, 180 to close) with a simple, well-understood asset: a single building, a single tenant, a single lease to underwrite — much faster to evaluate than a multi-tenant property with dozens of leases to review.

What cap rates look like right now, by tenant

NNN pricing is driven almost entirely by tenant credit and lease term, which is why cap rates on ostensibly similar buildings can vary by three or four full points. Investment Grade's Q1 2026 NNN market data shows the spread clearly:

• Ground-lease trophy tenants: McDonald's around 4.40%, Chick-fil-A around 4.50%, Raising Cane's around 5.00%.
• Quick-service and casual dining: Chipotle around 5.45%, Starbucks around 6.45%, corporate casual dining averaging around 6.55%.
• Pharmacy and convenience: CVS Health around 6.80%, Walgreens around 8.10%.
• Dollar stores: Dollar General around 7.15%, Dollar Tree around 7.57%, Family Dollar around 8.65% — and the report notes dollar-store cap rates widened across the board in Q1 2026, reflecting structural headwinds in that sub-sector.
• Auto: auto service tenants around 6.15%, auto parts around 6.65%.

The overall single-tenant net lease market averaged 6.80% in Q1 2026, essentially flat from the prior quarter, with inventory contracting nearly 10% quarter-over-quarter as supply tightened. The consistent theme: investment-grade tenants on long leases command the lowest cap rates (least risk), while shorter-term or non-rated tenants require a meaningfully higher yield to compensate for the added risk.

The risk that's easy to miss

A "hands-off" lease doesn't mean a risk-free one. The lease is only as good as the tenant behind it — a triple net lease from a struggling regional chain isn't the same asset as one from an investment-grade national brand, even at an identical rent number. Lease term matters just as much: a property with 12 years left on the lease and a 4.5% cap rate is a very different hold than the same building with 2 years left, regardless of what the current tenant is paying. And single-tenant means single point of failure — if that tenant vacates or defaults, the income stops entirely until it's re-leased, unlike a multi-tenant property where one vacancy is a partial hit.

NNN and site selection in Louisville & Southern Indiana

Freestanding NNN pads (drugstore, QSR, dollar store, auto parts) are built around the same fundamentals as any retail site: traffic counts, co-tenancy, and trade-area demographics — the same site-selection work covered on our Southern Indiana commercial page and retail investment page. Being dual-licensed in Kentucky and Indiana means we can evaluate a pad site on either side of the river against the same criteria.

What we look at with you

Before you commit to an NNN deal, we walk through the tenant's actual credit and financial health (not just the brand name on the sign), how much lease term is genuinely left versus options the tenant can decline to renew, what the rent escalation schedule looks like over the hold period, and how the site itself would perform if you ever had to re-lease it to someone else.

Frequently asked questions

Is a triple net lease actually maintenance-free for the landlord?

Mostly, yes, day-to-day — the tenant handles taxes, insurance, and CAM. But the landlord typically remains responsible for structural elements like the roof and foundation unless the lease specifically shifts those too (an "absolute" NNN lease).

Why do dollar store cap rates keep widening?

Per Q1 2026 market data, dollar-store cap rates widened across the sub-sector, reflecting investor concern about that segment's credit profile and store-closure activity relative to other retail categories — investors are demanding more yield to take on that risk.

Can I 1031 exchange into an NNN property from any type of investment property?

Generally yes — 1031 "like-kind" rules are broad for real estate, so proceeds from an apartment building, industrial property, or land can typically roll into an NNN retail property, subject to the standard 45/180-day exchange timeline and working with a qualified intermediary.

What's the difference between a single, double, and triple net lease?

A single net lease has the tenant paying property taxes on top of rent. A double net (NN) lease adds insurance. A triple net (NNN) lease adds common area maintenance, leaving the landlord with essentially no operating expenses.

Why is a McDonald's ground lease priced so much lower (cheaper cap rate) than a Walgreens?

Lower cap rate means investors are paying more per dollar of income, which reflects lower perceived risk — a McDonald's ground lease is viewed as extremely secure credit with strong renewal likelihood, while Walgreens' cap rate reflects a sector under more pressure (store closures, category headwinds) even though the brand itself is well known.

Are there NNN opportunities on the Southern Indiana side specifically?

Freestanding retail pad sites exist across New Albany, Jeffersonville, and Clarksville the same way they do in Louisville — the underwriting is the same, though zoning and incentive details differ by jurisdiction, which is where dual licensing helps.