Commercial Lease Types
Commercial leases differ significantly from residential leases. The three main types determine who pays for property expenses like taxes, insurance, and maintenance (collectively called CAM or Common Area Maintenance).
Commercial Lease Formula
Lease Type Comparison
| Lease Type | Tenant Pays | Landlord Pays |
|---|---|---|
| Triple Net (NNN) | Base rent + taxes + insurance + CAM | Structure/roof only |
| Full Service Gross | Base rent only (all-inclusive) | All operating expenses |
| Modified Gross | Base rent + some expenses | Remaining expenses |
| Absolute Net | Everything including structure | Nothing |
Frequently Asked Questions
What is a typical NNN charge?
NNN charges typically range from $5-$15 per square foot per year, depending on the property type, age, and location. In major metro areas, NNN charges of $8-$12/sqft are common for retail and office space.
What does the escalation clause mean?
An escalation clause specifies how rent increases over the lease term. Common structures include fixed annual increases (e.g., 3%/year), CPI-based adjustments, or step increases at specific intervals.
How do I compare NNN vs Gross leases?
To compare, calculate the total occupancy cost for each. A $20/sqft NNN lease with $10 NNN charges ($30 total) is more expensive than a $28/sqft Gross lease. Always compare the total effective rate.