Even as cap rates rose 100 to 150 basis points over the prior year, they rose far less than interest rates, which increased more than 400 basis points for some middle-market credits, making sale leaseback financing an increasingly compelling cost of capital solution relative to traditional debt. M&A activity softened amid regional banking headlines, persistent inflation, and a higher interest rate environment, though overall deal values remained roughly in line with pre-pandemic levels. Despite a widening of cap rates, an attractive value arbitrage between business and real estate multiples persisted, keeping sale leaseback opportunities appealing across a range of industry sectors.
