Home Depot is an investment grade home improvement retailer whose ratings place it in the A rating category. The median asking cap rate on the Home Depot store listings we track, last observed October 23, 2026, is 5.35% across 7 listings with a cap rate, against that category’s bond index yield of 5.84% as of October 1, 2026, a spread of −49 bps. That is a small sample; as of October 8, 2026, it held six store listings of 100,000 square feet or more, with a subsidiary’s distribution property left out.
Home Depot reports that 90% of the stores in its Primary segment were owned at the end of fiscal 2025, and that its owned stores include those subject to ground leases (Form 10-K for the fiscal year ended February 1, 2026), so an owned store can sit on leased land. Store ownership does not measure how often leased properties sell. As of October 8, 2026, 2 of the 6 Home Depot store listings we track were ground leases, 3 were not and 1 did not say, so confirm the ownership interest in each listing. See the Home Depot credit rating and NNN cap rate page.
Home Depot Credit Profile
| Metric | Details |
|---|---|
| S&P rating / outlook | A |
| Moody’s rating / outlook | A2 (Stable) |
| Status | Investment Grade |
| Rated entity in our database | The Home Depot, Inc. |
| Rating sources | S&P Global Ratings A, as of March 9, 2026; Moody’s A2, Stable, as of September 8, 2025; Fitch Ratings A, Stable, as of September 8, 2025. Ratings checked October 8, 2026. |
The Spread: Home Depot Bonds vs. NNN
The comparison uses the bond index yield for Home Depot’s rating category against the median asking cap rate on active Home Depot listings.
| Metric | Home Depot bonds (rating-category index) | Home Depot net lease properties |
|---|---|---|
| Latest yield measure | 5.84% (ICE BofA A index) | Median asking cap rate 5.35% (7 listings with a cap rate) |
| Spread, cap rate minus index yield | Baseline | −49 bps |
| Obligor | The issuing entity named in the bond’s indenture | The entity that signs or guarantees the lease |
| Minimum size | $2,000 face, then $1,000 increments, on Home Depot’s September 2025 notes, per the prospectus supplement | $16.30M median asking price |
| Liquidity | Trades over the counter through dealers | Sale timing varies with the property, lease and market |
| Income taxation | Interest taxed as ordinary income | Rent taxed as ordinary income, partly offset by depreciation of the building (land is not depreciable) |
| 1031 exchange | Not eligible (IRC 1031(a)(1) covers real property only) | Eligible when held for investment or business use and exchanged for like-kind real property held the same way (IRC 1031(a)(1)) |
| Value at the end | Face value at maturity absent default; market price moves before then | Depends on the property, lease term, and market |
| Income growth | Fixed coupon | Only if the lease provides rent increases |
Bond yield: ICE BofA effective yield index for Home Depot’s rating category via FRED, as of October 1, 2026; it is an index average, not a quote on Home Depot’s own bonds. Cap rate: median asking cap rate on active Home Depot store listings InvestmentGrade.com tracks, last observed October 23, 2026, a separate date from the index date; asking cap rates are not closed-sale cap rates. n/a means too few listings to report a median.
Why the Spread Exists
Home Depot stores average approximately 104,000 square feet of enclosed space plus approximately 24,000 square feet of outside garden area (Form 10-K for the fiscal year ended February 1, 2026), so the land and location matter as well as the lease. Asking cap rates on ground leases and fee simple listings vary, so compare them listing by listing. Where the tenant owns the building on a ground lease, the landowner has no building to depreciate, because land is not depreciable (IRS Publication 946; Treas. Reg. 1.167(a)-2).
After-Tax Illustration
The table compares one full year of after-tax cash for a fee simple property, where the investor owns the building, using the index yield for Home Depot’s rating category and the median asking cap rate shown above, with their observation dates. The bond column assumes a hypothetical bond bought at par with a coupon equal to that index yield; an actual note’s cash income depends on its coupon and purchase price. On a ground lease where the tenant owns the building, the landowner has no building to depreciate, so the rent is taxed without that offset. On a taxable sale of a fee simple property, gain attributable to depreciation may be taxed at up to 25% as unrecaptured section 1250 gain (IRC 1(h)(1)(E) and 1(h)(6)), plus the net investment income tax where it applies (IRC 1411). This is general information, not tax advice.
| One full year, $2,000,000 invested, all cash | Bond at 5.84% (A index) | NNN at 5.35% cap rate |
|---|---|---|
| Pre-tax income | $116,800 | $107,000 |
| Depreciation (building only, 80% of price over 39 years) | $0 | $41,026 |
| Taxable income | $116,800 | $65,974 |
| Federal tax at 40.8% | $47,654 | $26,918 |
| After-tax cash | $69,146 (3.46%) | $80,082 (4.00%) |
Illustration only. Assumes no financing, a 20% land allocation (land is not depreciable), straight-line depreciation with no cost segregation, a combined 40.8% federal rate (37% plus the 3.8% net investment income tax) on both incomes, and no state tax. It ignores closing and management costs, rent changes, and the sale. On a taxable sale, the part of the gain up to the depreciation taken is generally taxed at up to 25% (IRC 1(h)(1)(E), 1(h)(6)), plus the 3.8% net investment income tax where it applies (IRC 1411). A 1031 exchange into like-kind real property can defer that tax (IRC 1031(a)), but gain is taxable up to the cash and the value of any other non-like-kind property received (IRC 1031(b)). With cost segregation or other accelerated depreciation, part of the gain can be taxed as ordinary income even in an exchange (IRC 1245(b)(4), 1250(d)(4)). A bond bought at par returns par at maturity. Bond yield is the ICE BofA index yield for the tenant’s rating category via FRED; cap rate is the median asking cap rate on active listings InvestmentGrade.com tracks. Consult a tax advisor for your situation.
Frequently Asked Questions
What is the spread between Home Depot bonds and NNN cap rates?
The median asking cap rate on the Home Depot store listings we track, last observed October 23, 2026, is 5.35% against the bond index yield for its rating category, 5.84% as of October 1, 2026, a spread of −49 bps. The listing sample is small.
How is Home Depot rated?
The Home Depot, Inc. is rated A by S&P and A2 (Stable) by Moody’s, per our ratings database. Sources and dates: S&P Global Ratings A, as of March 9, 2026; Moody’s A2, Stable, as of September 8, 2025; Fitch Ratings A, Stable, as of September 8, 2025. Ratings checked October 8, 2026.
Can a Home Depot ground lease owner take depreciation?
Not on the land: land is not depreciable (IRS Publication 946; Treas. Reg. 1.167(a)-2). On a ground lease the tenant may own the building during the lease term, in which case the landowner has nothing to depreciate; confirm who owns the improvements in the lease.
Considering Home Depot Net Lease Property?
We source Home Depot properties nationally and underwrite the lease, the obligor, and the real estate. On the majority of transactions, there is no separate fee to you as the buyer.
Find it: Home Depot properties across lease terms and markets.
Fund it: financing matched to the tenant’s credit and the remaining lease term.
Exit it: buyers for Home Depot properties, including 1031 exchange buyers.
Exchange it: 1031 execution against the deadlines.
Related Reading
Educational content only. InvestmentGrade.com is a commercial real estate brokerage and educational publisher. We do not sell, broker, underwrite, or solicit any bonds, securities, or investment products. Yields, ratings, and prices referenced fluctuate continuously and are sourced from public market data as of the date noted. Nothing on this page constitutes investment advice, an offer to sell, or a solicitation to buy any security. Consult a licensed broker-dealer, registered investment advisor, or tax professional before making any investment decision. For SEC investor education, visit investor.gov.
