A triple net lease (NNN) is a lease structure in which the tenant pays base rent plus a proportional share of the property's three main operating costs — property taxes, building insurance, and common area maintenance (CAM) — in addition to their own utilities and janitorial costs. Triple net is the dominant lease structure for industrial and warehouse space in the United States.
What a triple net lease is
The "three nets" refer to the three operating cost categories billed to the tenant on top of base rent: property taxes, building insurance, and CAM. This contrasts with a gross lease, where the landlord absorbs those costs inside the quoted rent, and a modified gross lease, which splits responsibility between the two parties.
NNN is the default structure in industrial real estate for a simple reason: most industrial buildings are single-tenant, so there's no shared building to average costs across, and landlords prefer to pass through variable costs like tax reassessments rather than absorb the risk themselves. Multi-tenant industrial parks also commonly use NNN, prorating shared costs across tenants by square footage.
What to budget beyond base rent
Because NNN costs vary by property, tax jurisdiction, and insurance market, tenants should model an all-in cost per square foot rather than relying on the headline base rent figure alone.
| Cost component | Who pays | Typical range |
|---|---|---|
| Base rent | Set by landlord | $6–$25+ /SF/yr (varies by market) |
| Property taxes | Tenant, pro-rata | $0.50–$2.00 /SF/yr |
| Building insurance | Tenant, pro-rata | $0.10–$0.40 /SF/yr |
| CAM charges | Tenant, pro-rata | $0.50–$2.50 /SF/yr |
What to watch for before committing
CAM reconciliation and audit rights
Confirm you have the right to review the landlord's actual CAM expenses annually and dispute discrepancies before the reconciliation period closes.
Expense caps and exclusions
Negotiate a cap on annual CAM increases and exclude capital expenditures, landlord negligence costs, and non-operating expenses from your pass-through share.
Gross-up provisions
In multi-tenant buildings, confirm how the landlord calculates your share when the building isn't fully occupied — poorly worded gross-up clauses can inflate your cost.
Tax reassessment risk
A property sale or major renovation can trigger a tax reassessment that significantly raises your pass-through cost mid-lease — ask about recent assessment history.
Insurance requirements
Confirm whether you need your own liability policy in addition to the building's insurance pass-through, and what coverage minimums the lease requires.
All-in cost comparison
Never compare a quoted NNN rent directly to a gross lease rent — add estimated taxes, insurance, and CAM to get a true apples-to-apples cost per square foot.
When you need to know this
- Comparing buildings across lease structures — calculating true all-in occupancy cost rather than comparing headline rents
- Negotiating a multi-year lease — securing expense caps and audit rights before annual increases compound
- Evaluating a single-tenant vs multi-tenant building — understanding how CAM is prorated differently in each
- Budgeting for a new location — underwriting the true occupancy cost, not just quoted base rent
Frequently asked questions
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