When renting commercial real estate whether it be office space, retail space, or warehouse space most owners will use a triple net lease (seen as NNN). NNN stands for net, net net which are the property’s operating expenses (taxes, insurance, & common area maintenance fees) that the owner passes through to tenants.
Keep in mind that the NNN are in ADDITION to the base rent that you negotiate. I see too many people make the mistake of looking at online commercial real estate listings and thinking that $25 nnn meant they only have to pay $25 sf when in reality they are responsible for paying $25 sf PLUS the estimated NNN.
Also keep in mind that the NNN are estimated each year. Just because the owner says the NNN are $10 in 2016 does not mean they will be the same in 2017. You always have to factor in the possibility of the operating expenses increasing each year. Most of the time it’s because of the taxes which the owners do not have much control over. Insurance and CAM fees are items that landlords have more control over. When you are negotiating your lease it’s always a good idea of find out what the NNN were for the last 3-5 years.
Example of Calculating Monthly Rent in a NNN Lease
Let’s say an office building has a quoted rate of $30 NNN. This means that the rent is $30 per square foot per year PLUS the NNN. The estimated operating expenses (aka NNN) are $10 per square foot per year.
The total yearly rent you would pay equals $40 sf per year. So if you are leasing 3,000 sf then your yearly rent would be $120,000 or $10,000 per month.
Have Questions About NNN Leases?
Feel free to contact us at 512-861-0525 or https://www.austintenantadvisors.com/. Austin Tenant Advisors can not only help you find the right commercial space for your business, we can also help reduce your stress by educating you on the process, understanding rental rates, and negotiating on your behalf with landlords, owners, and listing agents.
