Short answer: In a gross lease you pay one rent and the landlord covers the building's taxes, insurance, and maintenance. In a NNN (triple net) lease you pay a lower base rent plus your share of those costs, billed separately. A NNN quote always looks cheaper because the expenses aren't in it. To compare fairly, add the estimated expenses to the NNN rent and project both over the full term. NNN can be cheaper, but you take on the risk that those costs rise.
How each lease type works
| Gross (full service) | Modified gross | NNN (triple net) | |
|---|---|---|---|
| You pay | One rent | Rent, plus expense increases above a set level | Base rent, plus your share of taxes, insurance, and maintenance |
| Quoted rent | Highest | Middle | Lowest |
| Who carries cost increases | Landlord | Mostly you, above the base level | You |
| Cost predictability | High | Medium | Low |
| Common in | Multi-tenant office | Office, some industrial | Retail, restaurants, freestanding buildings |
| Key clause to read | Escalations, and any "gross" lease that still passes through tax increases | Base year or expense stop | CAM / operating expenses, caps, exclusions, audit rights |
What "NNN" means: the three "nets" are property taxes, building insurance, and maintenance (common area maintenance, or CAM). In practice, the maintenance bucket often includes property management, landscaping, parking lot repairs, and an administrative fee, which is why the operating expense clause matters more than the label. More detail: NNN leases explained.
Labels aren't definitions. Some "gross" leases still pass through property tax or insurance increases, and some "NNN" leases make you pay for roof and structural repairs (sometimes called "absolute net"). Read what the lease actually makes you pay, not what it's called.
Comparing the real cost: a worked example
Two 2,000 sq ft spaces, 5-year leases, both with 3% annual rent increases:
- Space A: gross lease at $20/sq ft per year
- Space B: NNN lease at $12/sq ft base rent, plus operating expenses estimated at $8/sq ft in year 1, growing 5% per year
| Year | Gross (monthly) | NNN base rent | NNN expenses | NNN all-in | Difference |
|---|---|---|---|---|---|
| 1 | $3,333 | $2,000 | $1,333 | $3,333 | $0 |
| 2 | $3,433 | $2,060 | $1,400 | $3,460 | +$27 |
| 3 | $3,536 | $2,122 | $1,470 | $3,592 | +$56 |
| 4 | $3,642 | $2,185 | $1,544 | $3,729 | +$87 |
| 5 | $3,752 | $2,251 | $1,621 | $3,872 | +$120 |
| 5-year total | $212,365 | $215,829 | +$3,464 |
They start out equal. The NNN space gets more expensive only because its expenses grow faster (5%) than the rent increases (3%). Change the expense assumptions and the answer flips:
| NNN expenses (year 1, growth) | NNN 5-year total | vs. the gross lease |
|---|---|---|
| $6.50/sq ft, +5% per year | $199,252 | $13,113 cheaper |
| $8.00, +3% | $212,365 | Same |
| $8.00, +5% | $215,829 | $3,464 more |
| $8.00, +8% | $221,285 | $8,919 more |
| $10.00, +5% | $237,932 | $25,566 more |
The takeaway: the NNN decision depends mostly on two numbers, this year's expenses per square foot and how fast they've been growing. Get both from the landlord before you compare. You can run your own numbers in our free lease cost calculator.
Ask for: the last 2-3 years of actual operating expenses per square foot, the current year's budget, and what's included. If a landlord can't or won't share them, you can't price a NNN lease, and that's a reason to push for a cap or a gross structure.
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When NNN is the better deal
- The building is cheap to run: newer construction, low tax assessment, or a well-managed property. You get the savings directly; in a gross lease the landlord keeps them.
- You get a cap on controllable expenses. In the example above, capping the controllable 60% of expenses at 5% per year cuts the 8%-growth scenario from $8,919 extra to about $5,646.
- Long lease, steep gross escalations. If the gross rent rises faster than the building's expenses, the gross lease gets more expensive over time.
- You're a low-impact tenant in a building that divides costs fairly. You pay for what the building costs, not a landlord's padded estimate.
When gross is the better deal
- You need a predictable budget, especially in your first years in business.
- Taxes or insurance are rising fast in your market. A gross lease leaves that risk with the landlord.
- You can't get expense history, so you can't estimate the NNN total.
- You have little leverage to win NNN protections like a cap, exclusions, or audit rights.
What to negotiate
In a NNN lease, these are the protections attorneys for tenants push for most (benchmarks and sources):
- A cap on controllable expenses, commonly 3-5% per year, ideally non-cumulative. Caps rarely cover taxes, insurance, or utilities, and are less common in retail.
- Exclusions for capital improvements (or spreading them over their useful life), leasing commissions, debt service, the landlord's negligence, and executive salaries.
- An admin fee of 10% or less of common area costs (10-15% is typical).
- Audit rights: at least 12 months to review the annual statement, with the landlord paying for the audit if it finds an overcharge above 3-5%. See how to audit CAM charges and operating expense reconciliation.
- A fair pro-rata share, calculated on the building's full leasable area, and a reasonable gross-up provision.
In a gross lease:
- The escalation rate. About 3% per year is common; above 4% fixed is worse than market.
- What's really included. Confirm there are no tax, insurance, or utility pass-throughs hiding in a "gross" lease.
In a modified gross lease:
- The base year. Make sure it reflects a normal, fully occupied year. A low base year means you pay more of every future increase. See base year and expense stop.
Related guides
- NNN leases explained: what tenants pay in a triple net lease
- CAM charges explained: what's in common area maintenance and what to exclude
- Base year and expense stop: how modified gross leases split costs
- Gross-up provisions: how landlords adjust expenses for vacancy
- Commercial lease market standards: what's normal for every major clause
- Lease cost calculator: project your all-in cost year by year
Comparing spaces? LeaseLens reads your lease, calculates your full rent obligation, and checks the operating expense clause (caps, exclusions, admin fees, audit rights) against market standards — in minutes, for $75.