Best States for NNN Investing in 2025 (Ranked by Cap Rate & Growth)

Why State Selection Matters in NNN Investing

A common misconception among new NNN investors is that location doesn't matter much because "the tenant pays everything." That's partially true during the lease term — but location becomes critically important when the lease expires. If you need to re-tenant the building, attract a new buyer, or sell the asset, the location determines your options.

State selection also affects cap rates, deal availability, financing terms, and — for California-based investors in particular — the tax implications of owning out-of-state investment property. Here is The ESS Group's 2025 guide to the best NNN markets nationwide.

#1: Texas — The NNN Capital of America

Texas is consistently the highest-volume NNN market in the country, and for good reason:

• No state income tax: Investors keep more of their rental income
• Population growth: Dallas, Houston, Austin, and San Antonio are among the fastest-growing metros in America, driving retail demand
• Business-friendly environment: Lower regulatory burden supports retail expansion and new construction NNN development
• Cap rates: Typically 25–50 basis points higher than comparable California assets — better yield for similar credit
• Deal volume: More NNN transactions close in Texas than any other state, providing excellent liquidity at exit

Best Texas metros for NNN: Dallas-Fort Worth, Houston, Austin, San Antonio, Frisco, McKinney.

#2: Florida — No Income Tax, High Retail Demand

Florida combines no state income tax with some of the strongest retail traffic in the country, driven by a growing retirement population, year-round tourism, and significant in-migration from the Northeast and Midwest.

• Tampa, Orlando, Jacksonville, and Miami are all active NNN markets
• Strong Dollar General and Family Dollar penetration in secondary markets
• Drive-thru QSR demand is extremely strong given car-dependent suburban layout
• No state income tax benefits out-of-state investors receiving Florida rental income

Best Florida metros: Tampa Bay, Orlando, Jacksonville, Naples/Fort Myers, Miami.

#3: Georgia — The Southeast's Growth Engine

Atlanta has become one of the most important NNN markets in the South. Georgia's combination of major logistics infrastructure, a large and growing population, and business-friendly policies makes it a strong market for both new construction and existing NNN assets.

• Atlanta is a top-10 US metro with massive suburban retail demand
• Strong QSR penetration across all major chains
• Savannah has emerged as a secondary market with exceptional logistics-driven growth
• Cap rates run slightly higher than Texas, offering attractive entry points

#4: Tennessee — No Income Tax, High Growth

Tennessee has no state income tax on earned income and has become one of the fastest-growing states in the Southeast. Nashville's explosive growth has created significant NNN development activity, while Memphis serves as a major logistics hub driving retail demand in surrounding markets.

• Nashville is one of the most active secondary NNN markets nationally
• Strong new construction pipeline for QSR drive-thrus
• Cap rates typically higher than primary markets, offering better yield

#5: North Carolina — The Research Triangle's Rising Star

The Raleigh-Durham-Chapel Hill Research Triangle has emerged as one of the strongest growth markets in the country, driven by major tech and pharmaceutical relocations. Charlotte is already an established major metro. Together, these markets are producing significant NNN transaction volume.

• Strong income demographics support premium QSR and retail demand
• Active new construction NNN pipeline
• Cap rates slightly higher than comparable Texas assets

States to Approach with Caution

Not all markets are equally strong for NNN in 2025:

• California: Low cap rates (3.5%–5% for comparable assets), high land costs, and heavy regulations compress returns. California investors are better served buying NNN out of state with their California equity.
• Illinois (outside Chicago): Population outmigration and fiscal challenges in secondary markets create long-term re-tenanting risk.
• New York: Very limited NNN inventory, high land costs, and tenant-favorable legal environment.

The 1031 Exchange Angle for California Investors

For California-based investors, the calculus is particularly clear: California real estate trades at 3%–4% cap rates, while Sun Belt NNN assets of equivalent quality trade at 5%–6.5%. A 1031 exchange from a California multifamily or commercial property into a Texas or Florida NNN property can double your annual cash income on the same equity — while eliminating management obligations entirely.

The ESS Group has its deepest developer relationships in Texas, Florida, Georgia, Tennessee, and the Carolinas. Contact us to discuss current off-market inventory in these markets.