Triple net. Gross. Double net. What do all of these terms mean? These are all types of commercial leases, and they’re important for all commercial real estate professionals to know.
Whether you’re a CRE newbie or a seasoned veteran in need of reminding, this can help you negotiate with tenants and provide more options to prospects. Let’s go over the four most common types of commercial leases and how they work.
First up, the gross lease, which is also known as a “full-service lease.” These are generally the simplest leases for the tenant, as they typically involve paying a simple base rent rate. Tenants like this type of lease because they don’t have to worry about utilities and other expenses, so consider this type of lease if you’re looking to add further appeal to prospective tenants for your properties. (A bonus is that you can usually charge a higher base rent than other lease types.)
Next is the net lease. There are several types of net leases (single net, double net, triple net, etc.) and all involve the tenant paying their share of building/space expenses. Taxes, insurance and other elements of the lease are the tenant’s responsibility to manage, while the property owner enjoys the financial flexibility of allocating expenses based on space. Tenants do like that this lease generally results in lower base rent rates, however.
A type of a triple-net lease (NNN), absolute leases take the concept a step further by making the tenants absolutely responsible for all expenses, from taxes and insurance to utilities and repairs. This lease is basically like owning the business, but without the direct financial return that usually comes with it. These leases basically simplify things on the landlord’s side, whereas a gross lease is the opposite.
Finally, the last most-popular type of commercial lease we usually see is the percentage lease. One of the more complicated leases on this list, a percentage lease involves the tenant paying a base rent, plus an agreed-upon percentage of gross business sales. But the landlord covers major expenses, so it’s a form of compromise for both the tenant and owner.
If you’d like to see how Quarem can help you manage all types of commercial leases, request a demo of our commercial real estate software today.