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Thanks for stopping by the Three West Blog. Hopefully we can offer you some expertise regarding Northern Michigan commercial real estate, brokerage, leasing, property management, and business issues in and around the Traverse City region. The main purpose for our blog is to educate and help those looking for a resource as it relates to your commercial real estate and business needs. If you have a specific question, shoot us an e-mail at info@threewest.net and we'll do our best to provide an answer. We'll also post many of the frequently asked questions and answers that we come across on a daily basis. We look forward to hearing from you. Check back often.

Commercial Real Estate

The difference between a NNN Lease and a Gross Lease

Posted by Kevin Endres - Mar 12, 2009

If you’re in the market for new space for your business and are looking to lease, it is imperative that you understand the difference between the two common types of leases, NNN and Gross.

The term NNN Lease, or Triple Net Lease, refers to a lease where the tenant is responsible for not only the rent but the operating expenses also. The NNN, or Net-Net-Net, generally refers to the Common Area Maintenance (CAM), real estate taxes, and insurance. In this case, the tenant bears the entire risk of unexpected changes in operating expenses. A Gross Lease is a term used for a lease where the Landlord assumes the operating expenses. A Gross Lease is generally an all inclusive “out the door” payment structure. The Landlord is one who bears the risk of all unexpected changes in operating expenses.

With any lease, it is important to read the details very carefully to determine who pays for what. Some spaces may be advertised for a very low dollar amount per square foot, but have very high CAM fees, creating an overall payment that is more expensive than originally anticipated. The type of building construction will also play a large role in the type of lease advertised for a building. A $14/SF NNN lease for an older building, with old windows, and low energy efficiency will generally have a greater overall cost to the tenant compared to a newer energy efficient building due to the operating expenses required to heat and cool the space. In either case, it is always important to make sure that you have buyer representation, just like in a real estate purchase, looking out for your best interest in any lease negotiation.

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