NNN (Triple Net Lease)
A Triple Net (NNN) lease requires the tenant to pay three categories of building expenses on top of base rent: property taxes, building insurance, and common area maintenance (CAM). This shifts virtually all operating cost risk from the landlord to the tenant. In NYC, NNN charges typically add $15-$30/SF annually to your base rent, depending on the building's tax burden and maintenance costs.
Why It Matters for Operators
NNN leases make budgeting harder because your total occupancy cost fluctuates with property taxes (which increase annually in NYC), insurance premiums, and maintenance costs—none of which you control. Always request 3-5 years of historical NNN costs and negotiate annual caps (typically 3-5% increases) on controllable expenses. Without caps, a large tax reassessment could increase your rent by $10,000+ overnight.
FWDRE Insight
When comparing a NNN lease to a gross lease, calculate the total occupancy cost including all pass-throughs. Request an itemized breakdown of NNN charges and audit rights. We've found that landlords sometimes include capital improvements in CAM charges that should be amortized over 10+ years. Also watch for 'administrative fees' (typically 5-15% of total operating costs) that landlords add on top of actual expenses.
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