What is an NNN Lease in Commercial Real Estate?
NNN Lease Overview
An NNN Lease, or Triple Net Lease, is a type of commercial real estate lease in which the tenant is responsible for paying three key expense categories in addition to their base rent:
- Net Property Taxes – The tenant pays its proportionate share of property taxes.
- Net Insurance – The tenant covers its share of building insurance.
- Net Common Area Maintenance (CAM) – The tenant contributes to costs for maintaining shared spaces, such as landscaping, security, and utilities.
How It Works:
- The landlord typically passes these costs directly to the tenant, meaning the base rent appears lower than in a gross lease (where the landlord covers these expenses).
- This structure is common in retail, industrial, and office properties, especially for single-tenant buildings.
- Tenants prefer NNN leases when they want more transparency and control over operating costs, while landlords benefit from reduced financial responsibility.
Pros & Cons:✅ For Landlords:
- Predictable income with fewer variable expenses.
- Reduced risk from fluctuations in taxes, insurance, and maintenance.
✅ For Tenants:
- Greater control over property expenses.
- Often lower base rent compared to gross leases.
❌ Potential Downsides:
- Tenants bear financial risk if operating expenses increase.
- Requires careful lease negotiation to avoid excessive CAM charges.
Would you like an example of how NNN lease calculations work?
