Types of Leases

If you were to own your own building you would typically be responsible for 100% of the costs of maintaining that building. These costs could include property taxes, insurance, maintenance, landscaping, security, etc. When you lease a building these costs still exist, but now you are usually only responsible for your proportional share of these expenses based on the percentage of the building you occupy.

In a general sense, the biggest difference in the types of leases is how these expenses are worked into the Lease. For the same building quality in the same general area the different types of leases will often work out to around the same end cost.

Talk to your tenant representative to get an in depth analysis of what your lease will cost your business and how to find the right type of lease to best suit your needs.

For a brief look at each lease type please continue reading below.


NNN Lease (Triple Net)

NNN, or Triple Net, Leases are a type of lease where the tenant pays a base rent plus a "triple net fee" each month that covers their percentage of the operating expenses for the building (property taxes, building insurance, common area maintenance, etc). Commonly the tenant will then pay their utilities separately as well.

To approximate your rent:

(Base Rent + NNN Fee) x Square Feet = Annual rent before utilities and any other fees.

For example, if a space was 2,000 square feet at $12 per square foot per year NNN with $4 per square foot NNN fees:

(12 + 4) x 2000 = $32,000 annual rent ($2,666.67 per month) before utilities and other fees.


Modified Gross

Modified Gross Leases are the middle ground between NNN (Triple Net) and Full Service. The base rent is often a little higher than in NNN, but the fees to cover the proportional share of operating expenses are already worked into the rate for the first year. In Modified Gross Leases some of the utilities may come included while others will be the responsibility of the tenant.

To approximate your rent:

Base Rent x Square Feet = Annual Rent before utilities, and other fees.

For example, if a space was 2,000 square feet at $16 per square foot per year Modified Gross:

16 x 2000 = $32,000 base rent per year ($2,666.67 per month) before utilities, and other fees.


Full Service

Full Service Leases commonly have the highest base rent, but almost everything worked into the rental rate with few other fees. The proportional share of the operating expenses are included in the rate for the first year, similar to a Modified Gross lease, and then often most (or all) utilities will be included in the rate as well.

To keep rates a little lower a common trend right now is to see buildings listed as Full Service except janitorial, meaning the tenant is responsible for janitorial services while the landlord is responsible for almost everything else.

To approximate your rent:

Base Rent x Square Feet = Annual Rent before janitorial, and other fees

For example, if a space was 2,000 square feet at $18 per square foot Full Service:

18 x 2000 = $36,000 per year ($3,000.00 per month) before janitorial, and other fees (if applicable)


Disclaimer: This information is for general reference only, and is based on the laws for the state of Arizona. For specifics or further analysis in calculating your monthly rent contact your tenant representative.