When leasing warehouse space Landlords typically charge a base rent AND estimated operating expenses. Operating expenses are also sometimes referred to as Triple Nets (NNN’s) or Common Area Maintenance charges (CAM’s). Depending on the market you are in some landlords quote operating expenses on a yearly basis and some on a monthly bases. For example a monthly NNN expense would look like $0.15 NNN. A yearly NNN expense would look like $1.8 NNN. Both examples are equal to one another.
The operating expenses include all the taxes, insurance, and maintenance for the warehouse property as a whole and in most markets tenants WILL be required to pay this in addition to the base rent. They basically calculate the total operating expenses for the warehouse property and then divide it by the number of rentable square feet. Each tenant is then charged the SAME NNN expense. For example if the total estimated operating expenses are $100,000 and the total rental square footage is 50,000 then each tenant would pay $2 sf per year or $0.17 cents per month.
At the beginning of each year warehouse space owners “estimate” what their NNN’s will be. At the end of the year they reconcile to determine what the “actual” NNN’s are. If there is a decrease they credit you. If there is an increase that charge you the difference. You don’t typically see a huge swing in NNN charges however taxes are typically the main reason.
