A triple net (NNN) lease is a lease where the tenant pays base rent plus its share of three property costs: taxes, insurance and common area maintenance. A gross lease rolls those costs into one rent figure. Neither is cheaper by default. The answer depends on how fast operating costs rise and who carries that risk.
How the three common lease types split costs
Most commercial leases sit somewhere on a scale between "tenant pays everything" and "landlord pays everything." The label on the lease matters less than the expense clause, so read that section first.
| Triple net (NNN) | Modified gross | Full service gross | |
|---|---|---|---|
| Base rent | Lower | Middle | Highest |
| Property taxes | Tenant's share | Increases over a base year | Landlord |
| Building insurance | Tenant's share | Increases over a base year | Landlord |
| Common area maintenance | Tenant's share | Often split | Landlord |
| Utilities and janitorial | Tenant | Usually tenant | Landlord |
| Where you see it most | Retail, industrial, single-tenant buildings | Smaller office and flex | Multi-tenant office |
| Your cost risk | High | Medium | Low |
A full service gross rent looks expensive because the landlord has priced in current operating costs plus a cushion for next year's. With NNN you pay the actual costs, so you get the savings when costs fall and the bill when they rise.
A worked example: 2,000 square feet over two years
Take a 2,000 square foot retail space with a $24 per square foot base rent. That's close to the national average retail asking rent of $24.79 that CBRE reported for Q2 2026. Add $8 per square foot in estimated NNN charges. Compare that with a full service gross offer at $33 per square foot. Both leases carry a 3% annual rent increase. The figures are illustrative, not market data.
| Scenario | NNN lease total | Gross lease total |
|---|---|---|
| Year 1 | $64,000 | $66,000 |
| Year 2, operating costs up 10% | $67,040 | $67,980 |
| Year 2, operating costs up 25% | $69,440 | $67,980 |
In a normal year the NNN tenant saves about $1,000 to $2,000. A 25% spike in costs flips that, and the NNN tenant pays roughly $1,460 more. A property tax reassessment can cause exactly that jump. In California, for example, a change in ownership triggers reassessment under Proposition 13. If your building is likely to sell, price that risk before you sign.
Where NNN tenants actually lose money
The base rent is rarely the problem. The leaks show up in the reconciliation letter, usually a few months after the landlord closes its books for the year.
- Uncapped controllable costs. Landscaping, security and management can climb every year. A cap of a fixed percentage per year on controllable CAM limits the climb.
- Management fees charged on gross. Some leases let the landlord take a fee as a percentage of total operating costs, taxes included. Ask for it to be calculated on CAM only.
- Capital expenses passed through. A new roof or parking lot repave is an investment in the landlord's asset. If the lease allows it at all, push for the cost to be spread over its useful life.
- No audit right. Without one, you can't check the numbers. Our guide to CAM charges and reconciliation audits covers what to ask for.
Each of these is negotiable before signing and close to impossible to fix afterward.
Gross leases have their own catches
Modified gross and many "gross" office leases use an expense stop or base year. The landlord pays operating costs up to the level of the base year, and you pay your share of anything above it. If the base year was unusually cheap, for example a year with low occupancy or a property tax appeal in progress, every later year looks like an increase.
Ask for a base year when the building is at least 90% to 95% occupied, or for costs to be "grossed up" to that occupancy level. Otherwise a lease that looked fixed can start acting like an NNN lease in year two.
Also check which costs count toward the stop. If property taxes sit inside the expense stop and the building sells in year three, a reassessment lands on you just as it would under NNN. Some tenants ask for taxes to be excluded from increases tied to a sale, or for a separate base year for taxes. Landlords push back, but it's a fair ask in a building that's on the market.
Which lease fits your situation
- You're opening one location and cash flow is tight. A gross or modified gross lease gives you a predictable number. You pay a small premium for it.
- You're a multi-site operator or franchisee with a finance team. NNN usually wins. You can track costs across locations and audit outliers.
- The building is old or due for a sale. Lean gross, or negotiate caps. Old roofs and reassessments are where NNN costs spike.
- You need a long term. NNN with a cap on controllable CAM is the better deal over 10 years, because the savings compound and the cap limits the downside.
Our view is simple: a transparent NNN lease with a CAM cap and an audit right beats a gross lease for most tenants, because you pay for what the building costs instead of what the landlord fears it might cost. Gross makes sense when certainty is worth more to you than the savings.
Compare real offers, not labels
The cleanest comparison is total occupancy cost per year: base rent plus every pass-through, over the full term. Ask each landlord for last year's actual operating costs per square foot, not the budget. Then model a bad year. If you're also negotiating build-out money, factor in the tenant improvement allowance too, since a richer allowance can offset a higher rent.
On Waltre, tenants post a requirement once and verified landlords and brokers respond with matching space. Getting three or four offers at the same time is the easiest way to see which lease structure is actually cheaper in your market.
Run the numbers on a bad year before you sign. That's where the real difference shows up.
Frequently Asked Questions
Is a triple net lease cheaper than a gross lease?
Usually in a normal year, because the base rent is lower and you pay actual costs instead of a cushion. It can cost more when taxes, insurance or maintenance jump sharply, so model a bad year before you choose.
What does NNN mean in a commercial lease?
NNN stands for triple net. The tenant pays base rent plus its share of three property costs: property taxes, building insurance and common area maintenance.
What is a modified gross lease?
A modified gross lease splits operating costs between landlord and tenant. Typically the landlord covers costs up to a base year level and the tenant pays its share of increases above it.
Who pays for roof repairs in a triple net lease?
It depends on the lease. Some NNN leases pass structural and roof costs to the tenant, while others keep them with the landlord. Check the repair and maintenance clause and ask for capital costs to be amortized if they are passed through.
Can I negotiate NNN charges?
You can't usually negotiate the taxes themselves, but you can negotiate how charges are calculated. Common asks include a cap on controllable CAM, management fees calculated on CAM only, exclusions for capital expenses and an annual audit right.
