NNN Basics: Understanding Commercial Lease Types
Two spaces advertised at the same rate can cost wildly different amounts to occupy. The lease structure decides who pays taxes, insurance, and maintenance — here’s how to read it.
The spectrum, from landlord-pays to tenant-pays
- Full-service / gross: one rent number; the landlord covers taxes, insurance, and operating costs. Common in multi-tenant office.
- Modified gross: the middle ground — base rent plus some pass-throughs (often utilities and janitorial). Read the definitions clause carefully; “modified” means whatever the lease says it means.
- Triple-net (NNN): base rent plus the tenant’s share of the three nets — property taxes, insurance, and common-area maintenance. Standard for retail and freestanding buildings.
Comparing apples to apples
Always compare effective occupancy cost: base rent + estimated NNN charges + utilities + any direct expenses. A $14 NNN space with $4 in nets costs more than a $17 gross space — and NNN charges are estimates that reconcile annually, so ask for the last two years of actuals before signing.
What’s negotiable
More than most tenants think: caps on annual CAM increases, exclusions for capital expenditures and roof/structure, audit rights on reconciliations, and gross-up provisions in partially vacant centers. Landlords have their own must-holds. Knowing which levers move in this market is exactly what representation is for.