A triple net lease, abbreviated NNN, is a commercial lease in which the tenant pays base rent plus all three property expense categories: property taxes, building insurance, and maintenance. The landlord receives rent net of these costs and carries almost no operating responsibility. It is the most tenant-loaded of the net lease structures and common in single-tenant retail.
How Does a Triple Net Lease Work?
A triple net lease works by passing every operating expense to the tenant on top of a lower base rent. The tenant reimburses the landlord, or pays directly, for property taxes, insurance premiums, and maintenance including common area maintenance. The landlord collects a base rent that is effectively free of operating cost, which is why the structure is prized for predictable income.
Per Cornell Law School's Legal Information Institute and Prologis, the tenant in an NNN lease pays the three "nets" alongside rent, and most such leases run 10 or 15 years or longer. The landlord's role shrinks to little more than holding title, since day-to-day property costs sit with the tenant.
Component | Who pays | Representative rate per SF |
Base rent | Tenant | Quoted per deal |
Property taxes | Tenant | $0.50 to $6.00+ |
Insurance | Tenant | $0.05 to $1.00 |
Common area maintenance | Tenant | $0.25 to $3.00 |
The per-square-foot ranges above are representative figures from CommercialLeaseCost and vary widely by metro and property type. Because the tenant absorbs all three categories, the quoted NNN base rent understates the true occupancy cost, sometimes by several dollars per square foot.
Why Triple Net Lease Matters
A triple net lease matters because it moves nearly all property operating risk from the landlord to the tenant, which reprices the asset. With expenses passed through, the landlord's income is close to a bond-like stream, so NNN properties trade at lower cap rates than management-intensive assets. For the tenant, the structure converts occupancy into a variable, uncapped cost.
Per Marcus and Millichap and Offerd, single-tenant net lease properties averaged a cap rate near 6.9% in Q2 2025, while NNN assets leased to investment-grade tenants on 15-plus-year terms traded closer to 5.00% to 5.75%. The stronger the tenant credit and the longer the term, the lower the cap rate and the higher the price the landlord commands.
The quotable point for an operator: a triple net lease turns a landlord's return into a near-passive income stream and turns the tenant's rent into a variable cost that rises with taxes, insurance, and repairs.
Example
An investor buys a single-tenant NNN property net-operating-income of $200,000 at a 6.9% cap rate, the Q2 2025 STNL average per Offerd. Price equals NOI divided by cap rate. Separately, a tenant in a 2,500-square-foot unit at $22.00 base rent pays $5.50 per square foot of nets, for a full occupancy cost above the quoted rate.
Calculation | Formula | Result |
Property value | $200,000 / 0.069 | $2,898,551 |
Tenant base rent | $22.00 x 2,500 SF | $55,000 |
Tenant nets | $5.50 x 2,500 SF | $13,750 |
Tenant total occupancy | $55,000 + $13,750 | $68,750 |
At a 6.9% cap rate, $200,000 of net income supports roughly $2.9 million in value. On the tenant side, the $5.50 net charge lifts the effective rent from $22.00 to $27.50 per square foot, a 25% increase over the listed base rate.
Variations and Edge Cases
A triple net lease is not a single fixed contract, and the tenant's true exposure depends on caps, exclusions, and whether structural items are included. An absolute net or bond lease pushes even roof and structure to the tenant, while a capped NNN limits annual expense growth. The table below covers the variants an operator should confirm.
Variant | Treatment |
Standard NNN | Tenant pays taxes, insurance, and maintenance including CAM |
Absolute (bond) net | Tenant also carries roof, structure, and casualty with no landlord duty |
Capped NNN | Annual increase in pass-through expenses limited by a negotiated ceiling |
CAM with management fee | A 10% to 15% management fee may be added, ideally on CAM cost, not gross rent |
Reimbursement vs direct pay | Tenant either reimburses the landlord or pays taxing and insuring parties directly |
The most common mistake is treating a low NNN base rent as a bargain. A high-tax or coastal-insurance market can push the nets to $10 or more per square foot, so the effective rent may exceed a comparable gross lease. Always model the nets before comparing.
Triple Net Lease vs Gross Lease
A triple net lease is often confused with a gross lease, and both state a base rent, but they assign operating costs in opposite ways. Under a triple net lease the tenant pays base rent plus taxes, insurance, and maintenance, so the landlord's income is nearly cost-free. Under a gross lease the tenant pays one flat rent and the landlord absorbs the operating expenses.
Per Prologis, the practical difference is cost predictability versus yield insulation. A gross lease gives the tenant a single fixed payment while the landlord bears expense risk. A triple net lease gives the landlord a stable net return while the tenant absorbs every operating cost, which is why NNN base rents are quoted lower than gross rents.
Frequently Asked Questions
What does a tenant pay in a triple net lease?In a triple net lease the tenant pays base rent plus the three "nets": property taxes, building insurance, and maintenance including common area maintenance. The landlord receives rent net of these costs, so the tenant's total occupancy cost is higher than the quoted base rent.
What is a typical cap rate for a triple net lease property?Single-tenant net lease properties averaged a cap rate near 6.9% in Q2 2025 per Offerd, while NNN assets leased to investment-grade tenants on 15-plus-year terms traded closer to 5.00% to 5.75%. Stronger credit and longer terms produce lower cap rates and higher prices.
How is a triple net lease different from a single or double net lease?A single net lease passes only property taxes to the tenant, and a double net lease adds insurance. A triple net lease adds maintenance, so the tenant carries all three operating-expense categories. Each additional net shifts more cost and risk from landlord to tenant.
Related Terms
Net Lease
Gross Lease
Common Area Maintenance
Cap Rate
Base Rent