CRE glossary
Triple net lease (NNN)
A triple net (NNN) lease is a commercial lease in which the tenant pays base rent plus three additional categories of expense: property taxes, building insurance, and common-area maintenance (CAM). The landlord delivers a low base rate; the tenant absorbs the building's operating-cost variability.
Triple net is the most common structure for retail, industrial, and many single-tenant office leases. The structure makes the lease behave like a financial product for the landlord: rent is largely insulated from operating-cost inflation because every increase passes through to the tenant. Tenants accept the risk in exchange for a base-rent quote that is often 30–50% lower than a full-service equivalent.
The three N's are calculated on the tenant's pro-rata share of the building (premises SF / total rentable building SF). Each year the landlord reconciles actual operating costs against the estimated payments billed monthly; the tenant either owes a true-up payment or receives a credit. Most NNN leases include audit rights so the tenant can verify the math.
Brokers should always request the prior 2-3 years of CAM reconciliations before signing. Sudden jumps in property tax assessments, capital-expense pass-throughs disguised as repairs, or admin fees buried in the operating expense line can turn a cheap-looking NNN deal into a more expensive one than the gross-rent alternative.
Effective rent under NNN
Effective rent ($/SF) = Base rent + Tax + Insurance + CAM
Example
- Base rent
- $45.00/SF
- Property taxes
- $5.20/SF
- Insurance
- $1.10/SF
- CAM
- $8.40/SF
- Effective
- $59.70/SF
Broker perspective
When you're tenant-rep on a NNN deal, the negotiating leverage is on the expense pass-through definitions, not the base rate. Push for a CAM cap (annual % increase max), exclude capital expenditures and management fees over a threshold, and lock down audit rights. A 2.5% CAM cap saves the tenant more over a 10-year term than a $0.50 base-rent reduction.
Frequently asked
People also ask
Is NNN better for the landlord or tenant?
It's typically better for the landlord, operating-cost variability transfers to the tenant. Tenants get a lower base rate but accept the risk of expense escalation. Brokers negotiate caps to redistribute that risk.
What's typically included in CAM?
Janitorial, landscaping, common-area utilities, security, parking-lot maintenance, snow removal, management fees, and shared HVAC. Capital improvements should be amortized over their useful life, not expensed in a single year.
How is NNN different from absolute net (NN-N)?
Absolute net pushes structural and roof responsibility to the tenant too, the landlord effectively just collects rent. Triple net keeps structure with the landlord. Confirm which structure you have before pricing.
Do I pay NNN charges monthly or annually?
Both. Monthly estimated payments based on the prior year's actuals, then an annual reconciliation that trues up over- or under-payments.
Related terms
Common area maintenance (CAM)
Tenant's share of the cost to operate and maintain shared building areas, lobbies, parking, landscaping, HVAC, security.
Operating expenses (OpEx)
All costs to run the building, taxes, insurance, utilities, janitorial, management, that get passed through to tenants in NNN and modified gross structures.
Modified gross lease
A hybrid where the landlord covers some operating expenses in base rent and passes through others, middle ground between full-service and NNN.
Full-service (gross) lease
Landlord pays all operating expenses; tenant pays one rent number and that's it.
See triple net lease (nnn) extracted from a real lease.
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