What is NNN Lease (Triple Net)?
A lease structure where the tenant pays base rent plus all property operating expenses: taxes, insurance, and maintenance.
Definition
A triple net lease (NNN) is a commercial lease agreement in which the tenant is responsible for paying all three major property expenses in addition to base rent: property taxes, building insurance, and common area maintenance (CAM). NNN expenses typically range from $5-15/SF annually depending on the property and market, and they are added on top of the base rent to calculate total occupancy cost. In retail CRE, NNN leases are the dominant lease structure because they allow landlords to pass operating cost increases to tenants, making investment returns more predictable. For site selection, NNN costs must be factored into the total occupancy cost analysis — a location with low base rent but high NNN charges may not actually be a good deal. When comparing locations, always use gross rent (base + NNN) for apples-to-apples comparison.
Example
A retail space quotes $28/SF base rent plus $12/SF NNN, making the total gross rent $40/SF. The tenant's occupancy cost analysis must use $40/SF, not $28/SF.
Related Terms
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