Home Depot and Lowe’s are the two strongest credits available in big box net lease, and the choice between them is a study in how the market prices a two-notch rating difference. Both are investment grade tenants by a wide margin, both sign 20-year leases, and both occupy institutional-scale real estate. The rating framework in our investment grade guide puts Home Depot’s A/A2 profile two full notches above Lowe’s BBB+/Baa1, and the roughly 25 basis point cap rate gap between them is what that credit distance costs a buyer in yield.
Quick verdict: Home Depot (A/A2) is the tighter-priced, higher-credit asset at 4.25%–5.25% cap rates. Lowe’s (BBB+/Baa1) trades at 4.5%–5.5% with 2.0%–2.5% annual escalators common in its leases. Both are $15M–$35M institutional assets; this comparison is for large private buyers, family offices, and exchange buyers at the top of the price curve, not the $2M dollar store buyer.
Home Depot vs Lowe’s: Side-by-Side Comparison
| Metric | Home Depot | Lowe’s |
|---|---|---|
| S&P / Moody’s Rating | A / A2 (Stable) | BBB+ / Baa1 |
| US Store Count | ~2,000 | ~1,750 |
| Cap Rate Range (2026) | 4.25%–5.25% | 4.5%–5.5% |
| Typical Primary Lease Term | 20 years | 20 years |
| Escalations | Modest fixed increases; bumps at renewals | ~2.0%–2.5% annually (typical) |
| Guarantee | Corporate (The Home Depot, Inc.) | Corporate (Lowe’s Companies, Inc.) |
| Typical Price Point | $15M–$35M | $15M–$35M |
| Annual Revenue | $159.5B (FY2025) | Roughly half of Home Depot’s |
| Building Format | ~100,000+ sq ft on 10–15 acres | 130,000–170,000 sq ft, similar acreage |
Ranges reflect current market conditions per our tenant profiles; ground lease vs fee simple structure materially changes pricing on individual big box assets.
Credit Rating Comparison: A/A2 vs BBB+/Baa1
Home Depot holds A from S&P and A2 from Moody’s, both Stable, placing it among the strongest retail credits in the country and five notches above the investment grade cutoff. Lowe’s holds BBB+ and Baa1, upper-tier investment grade with three notches of cushion. Neither tenant presents meaningful default risk over a typical hold period; the difference is about pricing, financing spreads, and exit liquidity rather than survival.
Where the two notches genuinely matter is at the institutional exit. Core funds and net lease REITs that screen by rating band will pay measurably more for A-rated paper, which is why Home Depot consistently trades through Lowe’s even on otherwise identical real estate. Both tenants are tracked alongside the rest of the rated retail universe on our credit tenant ratings index.
Cap Rates: Paying for the Credit
Home Depot assets trade at 4.25%–5.25% and Lowe’s at 4.5%–5.5%. These are among the tightest cap rates in all of net lease, compressed by three forces: rare supply (both companies own most of their real estate), 20-year terms, and land-heavy sites of 10–15 acres in proven retail corridors where the dirt alone anchors value.
Within each range, ground leases price tighter than fee simple deals, and assets with near-term rent bumps or percentage-of-FMV renewal options price wider. A Lowe’s with contractual 2.0%–2.5% annual escalators can out-earn a flat Home Depot lease by enough over a 10-year hold to more than close the going-in spread, which is the single most overlooked point in this comparison.
Underwriting detail on each tenant: Home Depot credit rating & NNN cap rate and Lowe’s credit rating & NNN cap rate.
Lease Structure: Term, Escalations, and Guarantee
Both tenants sign 20-year primary terms with five-year renewal options stacking to 25–30 years of potential occupancy, and both leases are direct corporate obligations of the parent: no franchisees, no operating subsidiaries standing between the landlord and the rated entity. That guarantee quality is as clean as net lease gets.
Escalation structure is the divergence. Lowe’s leases commonly carry 2.0%–2.5% annual escalators. Home Depot leases lean toward modest fixed increases with bumps concentrated at renewal periods, and some renewal options float to fair market value, which shifts long-term rent growth risk onto the appraisal process. Buyers should model both leases year-by-year rather than comparing going-in cap rates alone.
Footprint, Store Strategy, and Residual Risk
Home Depot operates about 2,000 US stores and has been deepening its professional contractor moat, including its $18.25B acquisition of SRS Distribution. Lowe’s operates about 1,750 stores with heavier DIY skew and has been investing to grow its own Pro segment. Both keep stores in place for decades and reinvest in existing facilities, which supports renewal probability, the single most important variable on a 20-year big box lease.
The shared risk is format concentration: a 130,000+ sq ft box has a short list of replacement tenants if the improbable happens. That is the real reason big box cap rates carry any spread at all over the tenants’ own bonds. The offset is land: 10–15 acre parcels on dominant retail corridors hold redevelopment value that a bond never will.
Bond Yields vs NNN Cap Rates: The Pivot
Both companies are benchmark-size bond issuers. Home Depot intermediate bonds have recently yielded in the high-4% area and Lowe’s in the low-5% area, against NNN cap rates of 4.25%–5.25% and 4.5%–5.5% respectively. The headline spread between the bond and the building is the thinnest in net lease, sometimes under 50 basis points, but the comparison flips decisively after tax: the NNN owner takes depreciation against the income, can exchange the asset under Section 1031 indefinitely, and owns appreciating land under an A-rated covenant. The bondholder gets ordinary income and par at maturity.
Full comparisons: Home Depot bonds vs NNN and Lowe’s bonds vs NNN.
Which Tenant Fits Which Buyer?
Choose Home Depot if credit quality and exit liquidity dominate your criteria: the A/A2 rating is the safest covenant in big box retail, institutional demand at exit is deepest, and the assets behave most like a real estate substitute for a corporate bond, with land underneath.
Choose Lowe’s if you want the same 20-year structure with more yield and, in many leases, annual escalators that compound rent from year one. For a buyer holding 10+ years rather than trading on rating bands, the escalation-adjusted return frequently favors Lowe’s.
Evaluating a big box net lease acquisition? We benchmark Home Depot and Lowe’s offerings against live comps, ground lease vs fee structures, and current institutional financing quotes, and can produce a Broker Opinion of Value within 48 hours. Request a buyer consultation.
Frequently Asked Questions
Is Home Depot or Lowe’s a better NNN investment?
Home Depot offers stronger credit (A/A2 vs BBB+/Baa1) and deeper institutional exit demand at 4.25%–5.25% cap rates. Lowe’s offers roughly 25 basis points more yield at 4.5%–5.5% and commonly carries 2.0%–2.5% annual escalators. Credit-driven buyers favor Home Depot; escalation-adjusted total return over long holds frequently favors Lowe’s.
What are the credit ratings of Home Depot and Lowe’s?
Home Depot is rated A by S&P and A2 by Moody’s, both with Stable outlooks. Lowe’s is rated BBB+ by S&P and Baa1 by Moody’s. Both are comfortably investment grade; Home Depot sits two notches higher on each agency scale.
What cap rates do Home Depot and Lowe’s NNN properties trade at?
Home Depot NNN properties trade at roughly 4.25%–5.25% cap rates and Lowe’s at roughly 4.5%–5.5%. Ground lease structures, remaining term, and escalation schedules move individual assets within these ranges, which are among the tightest in all of net lease.
Why are big box cap rates so close to the tenants’ bond yields?
Because the market treats a 20-year corporate-guaranteed lease from an A-rated tenant as bond-like income secured by land. The pre-tax spread can be under 50 basis points, but NNN ownership adds depreciation deductions, 1031 exchange eligibility, and residual land value that bond ownership cannot provide, so after-tax returns diverge substantially.
Who buys Home Depot and Lowe’s NNN properties?
At $15M–$35M per asset, the buyer pool is institutional: net lease REITs, core funds, family offices, and large 1031 exchange buyers trading out of management-intensive portfolios into a single passive credit asset. The format is a common endpoint for investors consolidating multiple smaller exchange proceeds.
