This is the second of a series of 3 blogs explaining the different types of commercial rent structures. A Triple Net Lease (NNN lease) is a common leasing structure in commercial real estate where the tenant assumes responsibility for the property’s operating expenses in addition to paying base rent. These operating expenses typically include property taxes, building/property insurance, and common area maintenance (CAM) costs which might include snow removal, security, water, garbage, parking lot maintenance, etc. NNN Leases are common in retail, office and industrial real estate, offering stability for landlords while tenants bear the risks and rewards of property-related expenses.
Key Features Of A NNN Lease:
- Base Rent: This is the fixed rental payment the tenant agrees to pay the landlord. It compensates the landlord for the use of the property and often depends on the location, size, and market demand.
- CAM Charges: Common Area Maintenance expenses cover the upkeep of shared spaces, such as landscaping, parking lots, hallways, or lobbies. This ensures the property remains functional and attractive. A tenant would pay their proportionate share of of the total CAM charges for the property. This may be a variable expense item.
- Pass-Through Costs: Property taxes and insurance are passed directly to the tenant. These costs can fluctuate annually, depending on tax assessments and insurance premiums. A tenant would pay their proportionate share of of the total CAM charges for the property. This may be a variable expense item.
- CAM and Pass-Through Costs may also be called Additional Rent in your lease agreement.
Example Of A NNN Lease:
Consider a retail strip center where a tenant leases a 2,000 sq. ft. space for $25 per square foot annually in base rent. In addition to the base rent ($50,000 annually), the tenant also pays their proportionate share of the property taxes, insurance, and CAM. If the total annual operating expenses for the center are $120,000 and the tenant occupies 10% of the center’s rentable area, their share of the pass-through costs would be $12,000. Thus, the tenant’s total annual cost in this NNN lease would be $62,000.
If you are looking for a commercial space, contact Sharon Bogetz at 847-370-9131. She’s been working with owners, investors, healthcare providers and commercial tenants since 2019.