A commercial lease where the tenant pays base rent plus nearly all operating expenses: property taxes, building insurance, and structural maintenance. The "three nets" represent these three categories of additional cost.
Triple net (NNN) leases are the dominant structure for single-tenant retail, fast-food, industrial, and net-lease investment properties. Landlords favor them because they provide predictable, bond-like cash flow insulated from fluctuating operating costs. Tenants often accept NNN terms in exchange for lower base rents and control over property maintenance.
In addition to the three nets, tenants in NNN leases typically pay all utilities, interior repairs, and often HVAC maintenance. In an absolute NNN lease, the tenant also assumes responsibility for the roof and structural elements — the most landlord-favorable structure possible.
NNN leases quote two rates: a base rent per square foot and estimated NNN expenses per square foot. Example:
NNN expenses are estimated at lease signing and reconciled annually against actual costs. If actual costs exceed estimates, the tenant pays the difference; if costs come in lower, the tenant receives a credit.
Because the tenant absorbs operating cost risk, NNN base rents are typically 15–25% lower than comparable gross lease rents for the same space. A gross lease might quote $35/SF while the NNN equivalent quotes $27/SF — but after adding $6–8/SF of NNN expenses, the effective occupancy cost may be similar or higher depending on actual operating costs.
When abstracting a NNN lease, pay particular attention to:
Tenants in NNN leases can audit their operating expense pass-throughs with CAMAudit.io. Property managers preparing NNN reconciliations can automate allocation with CapVeri.com.
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NNN stands for triple-net, meaning the tenant pays three categories of property expenses on top of base rent: real estate taxes, building insurance, and common area maintenance (CAM). In a true NNN lease, the landlord receives net rent with virtually all operating costs passed through to tenants. NNN leases are the most common structure for freestanding retail, industrial, and single-tenant commercial properties.
In a gross lease, the landlord pays all operating expenses and bundles them into a single monthly rent amount, giving the tenant predictable costs. In a NNN lease, the tenant pays base rent plus separate charges for taxes, insurance, and maintenance, making costs variable year to year. NNN base rents are typically $5 to $15 per RSF lower than gross lease rents for equivalent space, but total occupancy cost is similar once pass-throughs are included.
NNN lease terms typically run 5 to 15 years with annual rent escalations of 2% to 3%. Tenants pay their pro-rata share of property taxes (often $3 to $8 per RSF), building insurance ($1 to $3 per RSF), and CAM costs ($2 to $6 per RSF). Total pass-throughs commonly add $8 to $15 per RSF on top of base rent. Tenants should negotiate caps on controllable expenses and exclude capital expenditures from pass-through obligations.
The five main types of commercial leases — NNN, gross, modified gross, percentage, and ground — have very different cost structures and risk profiles. Here's how each works.
A triple net lease (NNN) requires tenants to pay base rent plus property taxes, insurance, and maintenance. Learn how NNN leases work, what's included, and how they compare to gross leases.
A NNN lease quotes base rent, but your actual monthly payment is typically 25–40% higher. Learn to calculate total occupancy cost — base rent + CAM + taxes + insurance — with worked examples.
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