A full-service gross lease is an office lease in which the tenant pays one all-inclusive rent and the landlord covers every building operating expense: property taxes, insurance, maintenance, janitorial, utilities, HVAC, and security. In year one the tenant owes no separate pass-throughs. A base year then sets the floor above which expense increases are shared.
How Does a Full-Service Gross Lease Work?
A full-service gross lease works by bundling all building operating expenses into a single quoted rent, often expressed per rentable square foot. Per Adventures in CRE, the tenant pays one all-inclusive amount, such as $40 per rentable square foot, and the landlord pays taxes, insurance, maintenance, janitorial, utilities, HVAC, and security out of that rent. The tenant faces no separate expense bill in year one.
The base year is the mechanism that protects the landlord from expense inflation. Per SquareFoot, the landlord absorbs operating expenses incurred during the first calendar year, the base year, and from the following year the tenant pays its pro-rata share of any increase above that base year amount. The all-inclusive rent stays fixed while expense growth above the base year passes through.
Expense | Full-service gross treatment |
Property taxes | Landlord, bundled into rent |
Insurance | Landlord, bundled into rent |
Utilities and HVAC | Landlord, bundled into rent |
Janitorial | Landlord, bundled into rent |
Expense increases after base year | Tenant pays pro-rata share above base year |
Why Full-Service Gross Lease Matters
A full-service gross lease matters because it gives the tenant a predictable first-year occupancy cost while shifting the burden of tracking and grossing-up expenses to the landlord. The tenant budgets one number. The landlord must set the base year correctly, because a base year established during low-occupancy years creates a low floor and passes larger increases to the tenant later.
Per FNRP, full-service gross leases are most common in multi-tenant office buildings, where dividing utilities and janitorial tenant by tenant would be impractical. For an operator underwriting an office asset, the base year is the number that matters: a base year set artificially low inflates future pass-through income on paper but invites tenant disputes at reconciliation. The quotable point: a full-service gross lease sells the tenant certainty in year one and prices expense risk into both the rent and the base year.
Example
A tenant leases 5,000 rentable square feet on a full-service gross lease at $42 per square foot with a 2025 base year. Year-one rent is $210,000 and the tenant pays no pass-throughs. Building operating expenses were $9.00 per square foot in the 2025 base year. In 2026 they rise to $9.60. The tenant now pays its pro-rata share of the $0.60 increase.
Step | Calculation | Result |
Rentable square feet | Given | 5,000 |
Year-one rent | 5,000 x $42 | $210,000 |
Base year expenses (2025) | Given | $9.00 / SF |
Current-year expenses (2026) | Given | $9.60 / SF |
Expense increase per SF | $9.60 - $9.00 | $0.60 / SF |
Tenant pass-through | 5,000 x $0.60 | $3,000 |
In year one the tenant paid only the $210,000 all-inclusive rent. In 2026 it owes that rent plus a $3,000 pass-through for expenses above the base year, while the landlord absorbs everything up to the 2025 floor.
Variations and Edge Cases
A full-service gross lease is not identical across buildings, and tenant exposure depends on how the base year and any expense stop are written. Some leases replace the base year with a fixed expense stop, a dollar-per-square-foot ceiling set at signing. The table below covers the variants an operator should confirm.
Variant | Treatment |
Base year | Landlord covers expenses to first-year level; tenant pays increases above it |
Expense stop | Landlord's obligation capped at a fixed dollar per SF set at signing |
Gross-up provision | Expenses restated as if the building were fully occupied, protecting the tenant |
After-hours HVAC | Often billed separately despite the all-inclusive rent |
The common mistake is treating the all-inclusive rent as fixed for the full term. After the base year, expense increases pass through, and a low base year set during building lease-up can produce steep pass-throughs in later years.
Full-Service Gross Lease vs Triple Net Lease
A full-service gross lease is often confused with a triple net lease, and the two assign operating expenses in opposite directions. Under a full-service gross lease the tenant pays one all-inclusive rent and the landlord covers taxes, insurance, and maintenance. Under a triple net lease the tenant pays a lower base rent plus those three expenses directly.
Per FNRP, the full-service gross form quotes a higher rent that already contains operating costs, leaving expense risk with the landlord above the base year. A triple net lease strips expenses out, quotes a lower base rent, and passes taxes, insurance, and maintenance to the tenant in full. An office tenant wanting one predictable number prefers full-service gross; a landlord wanting an insulated net yield prefers triple net.
Frequently Asked Questions
What does a full-service gross lease include?A full-service gross lease includes all building operating expenses in the quoted rent: property taxes, insurance, maintenance, janitorial, utilities, HVAC, and security. Per Adventures in CRE, the tenant pays one all-inclusive amount and faces no separate pass-throughs in the first year.
How does the base year work in a full-service gross lease?The base year is the first year of the lease, and the landlord absorbs operating expenses at that level. From the following year, the tenant pays its pro-rata share of any expense increase above the base year amount, while the all-inclusive rent stays fixed.
What is the difference between full-service gross and modified gross?A full-service gross lease bundles all operating expenses into the rent with the landlord covering them to the base year. A modified gross lease splits expenses more selectively, often leaving specific costs such as the tenant's own utilities or janitorial with the tenant from day one.
Related Terms
Gross Lease
Base Year
Triple Net Lease
Rentable Square Feet