Ever hear the term "Triple Net" (NNN) and wonder what it really means? If you're entering the world of commercial real estate or leasing, understanding this concept is crucial. It's a specific way landlords structure rent that can affect your bottom line. Let me break it down for you using a metaphor.
Imagine that when you pay rent to a landlord, you're handing over a bucket of money. But this bucket isn't just one big lump sum—it's divided into four colorful layers, each representing a different use for the money. Here's what those layers look like:
Base Rent: The bottom layer—this is what you pay for the space itself.
Common Area Maintenance (CAM): The next layer—expenses for maintaining shared spaces, like landscaping, parking lot upkeep, and shared utilities.
Property Tax: The third layer—your portion of the taxes on the property.
Property Insurance: The top layer—your share of the insurance costs for the building.
Together, these four layers make up your total rent payment. In a Triple Net lease, you're responsible for all of them, not just the Base Rent. This means you need to carefully budget for additional costs like property taxes and insurance, which can change over time.
Next time you see "NNN" on a lease agreement, remember the bucket—and make sure you're clear on how much each layer will cost you.

How are NNN Costs Calculated?
NNN costs are estimated annually, based on the previous year’s expenses. At the end of the year, these costs are reconciled. If the actual expenses were lower than estimated, you might receive a refund or credit. If they were higher, you’ll receive a bill for the difference.
For example, an unusually snowy winter could increase the cost of parking lot maintenance, while a drought might reduce landscaping costs. These fluctuations are accounted for in the NNN reconciliation process.
Gross Lease vs. NNN Lease: What’s the Difference?
Let’s compare a gross lease and a NNN lease using a real-world example:
You find a 1,400 SF retail space.
One landlord quotes $2,160 per month.
Another quotes $18.52 per square foot (PSF) per year.
Which one is more expensive? Neither—they’re the same price!
Here’s the math:
$2,160 x 12 = $25,920 per year
$25,920 ÷ 1,400 SF = $18.52 PSF per year
But here’s the key difference: with a gross lease, you’re paying $18.52 without knowing how the money is spent. With a NNN lease, the same amount is broken down into Base Rent ($15.00) and NNN costs ($3.52), giving you more insight into the expenses.
Final Thoughts:
While gross leases may seem simpler at first glance, NNN leases offer greater transparency and allow both Landlords and Tenants to adapt to changing circumstances. Don’t let the NNN structure intimidate you—it’s just a tool to give you a clearer picture of your lease’s economics. The key is understanding the breakdown of costs so you can make informed decisions about your space.
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