WHAT IS A NNN LEASE? | WHAT IS NNN? | WHAT IS TRIPLE NET?
A NNN lease or triple net lease is one of the most common lease structures in Commercial Real Estate. A NNN lease contains a provision for the tenant to pay, in addition to the tenant’s base rent, certain costs associated with operating the property. Each “N” or “Net” stands for Property Taxes, Insurance and Operating Expenses. Operating Expenses are often also referred to as CAM – Common Area Maintenance, and are the expenses it takes to run the property, such as repairs and maintenance, trash removal, snow removal, landscaping, parking lot maintenance, property management, exterior lighting and more.
Depending on the property, utilities and janitorial may also be included in the Operating Expenses or CAM. With a NNN lease, you typically pay the landlord one check per month, but that check is broken down into two main categories:
- The Base Rent Amount
- The NNN Amount (or Triple Net Amount)
For example, if you leased a 2,000 SF space with a $24 per SF base rent and $8 per SF NNN, the breakdown of payments would be:
- Base Rent: 2,000 SF x $24 per SF = $48,000 per year or $4,000 per month
- · NNN: 2,000 SF x $8 per SF = $16,000 per year or $1,333 per month
Total rent is $5,333 per month; with the NNN being $1,333 per month.
NNN leases are the most common type of lease you will find in Retail Properties, Newer Medical Buildings and the majority of Office Buildings. The next most common lease is a Full Service Lease, followed by Gross Leases and Modified Gross Leases.