NNN vs. gross lease — what’s the difference?
The difference is who pays the building’s operating costs. In a triple net (NNN) lease, the tenant pays base rent plus the property’s taxes, insurance, and maintenance. In a gross lease, the tenant pays one flat rent and the landlord covers those costs. Most leases fall somewhere on that spectrum.
It’s really one question: who pays the operating costs?
Every commercial lease sits on a spectrum defined by how the building’s operating expenses — property taxes, insurance, and maintenance — get split between landlord and tenant.
- Gross (full-service) lease. The tenant pays one flat rent; the landlord covers taxes, insurance, and maintenance (often utilities and janitorial too). Common in multi-tenant office. Higher rent, but predictable for the tenant.
- Triple net (NNN) lease. The tenant pays a lower base rent plus the “three nets” — property taxes, insurance, and common area maintenance (CAM). Common in retail, single-tenant, and industrial. The tenant carries the variable costs.
- Modified gross. The middle ground — the tenant pays base rent plus some expenses (say, their own utilities) while the landlord covers the rest. Extremely common in practice.
The full net-lease ladder
- Single net (N). Tenant pays base rent + property taxes.
- Double net (NN). Base rent + taxes + insurance.
- Triple net (NNN). Base rent + taxes + insurance + CAM.
- Absolute (bondable) net. Tenant pays essentially everything, including structure and roof — the most landlord-friendly of all.
Compare rents apples-to-apples
A gross rent and an NNN rent aren’t comparable until you add the nets to the NNN figure:
| Gross lease — quoted rent | $28.00 / sf |
| NNN lease — base rent | $20.00 / sf |
| + Estimated nets (taxes, insurance, CAM) | $8.00 / sf |
| NNN — effective occupancy cost | $28.00 / sf |
Same true cost — the “cheaper” $20 NNN rent only looks cheaper until you add the nets. Always convert to effective cost before advising a client.
Why it matters to investors
Lease structure shifts expense risk, which shows up directly in NOI and value. Long-term NNN leases to creditworthy single tenants are prized because they produce predictable income with minimal landlord responsibility — which often earns a lower, premium cap rate.