March 18, 2026
Triple Net Leases Explained (NNN Lease Guide for Commercial Real Estate)
If you’ve ever looked at a commercial lease and seen “NNN” or “triple net”, you’re not alone in wondering what it actually means—and more importantly, how it impacts what you pay.
In this episode of Commercial Real Estate Secrets, Aviva Sonenreich, commercial real estate broker based in Denver, Colorado, breaks down triple net leases (NNN leases) in a simple, practical way so you can understand how rent and expenses are actually calculated in commercial real estate.
Key Topics Discussed:
- What a triple net lease (NNN lease) actually means in commercial real estate
- The difference between gross leases vs net leases
- What the three “nets” are: property taxes, insurance, and CAM expenses
- Why landlords shifted to triple net leases (rising taxes, insurance, and operating costs)
- How to calculate your total rent + NNN expenses step-by-step
Save This Episode
If you’re leasing or buying commercial real estate, save this episode so you can quickly reference:
How to calculate rent + triple net expenses before signing a deal.
Because in commercial real estate, the number you see is almost never the number you actually pay.
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Triple Net explained.
So you are doing something with
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00:00:03,440 --> 00:00:06,440
commercial real estate and you
are seeing these three capital
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00:00:06,480 --> 00:00:09,360
ends and you are thinking to
yourself, what are these?
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00:00:09,520 --> 00:00:13,120
You might have leased a house or
apartment in the past.
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00:00:13,160 --> 00:00:15,560
We'll just say it's $1000 a
month.
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00:00:15,800 --> 00:00:19,880
You sign the lease and you have
agreed to pay $1000 a month and
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every month you write a check
for 1000 bucks.
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This is called a gross lease.
A gross lease is a lease where
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all of the expenses are combined
with the rents.
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00:00:31,880 --> 00:00:35,240
This is very common in
residential real estate.
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So you're renting an apartment,
you've got a gross lease.
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Now we understand what that is.
Now the three ends, you'll see
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the way we refer to them is
triple net and it literally
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stands for net, net, net.
When you are leasing commercial
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00:00:52,720 --> 00:00:56,200
real estate or buying commercial
real estate, you will notice
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00:00:56,200 --> 00:01:02,520
that 99.9% of the time your
leases have these three capital
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NS net, net, net.
So gross leases are over here.
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We're talking triple net today.
So what do the Nets actually
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stand for?
N1 stands for property taxes, N2
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stands for insurance and N3
stands for Cam common area
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maintenance.
Those are your 3 ends.
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So now we are thinking in two
buckets, one your rent only and
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the second bucket is going to be
your triple net expenses.
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And in commercial real estate,
you need to calculate these
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separately.
So at this point, you're
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00:01:47,040 --> 00:01:50,160
probably thinking to yourself,
why are we complicating this?
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00:01:50,160 --> 00:01:52,200
Why can't I just have a gross
lease?
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The reason that landlords used
to do gross leases but no longer
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00:01:57,760 --> 00:02:02,720
do, I'd say in like early 2000s
is when all the landlords across
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00:02:02,720 --> 00:02:06,840
the United States went from
gross leases to net leases is
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00:02:06,840 --> 00:02:10,320
because they didn't know how
much money they were going to
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00:02:10,320 --> 00:02:13,280
make with those triple net
expenses.
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What does that mean?
So here I'm going to show you a
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graph.
This is how much property taxes
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00:02:20,240 --> 00:02:24,040
have gone up for this one
building year over a year.
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OK, so landlords are seeing
property taxes, insurance going
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up, up and up.
These are expenses they cannot
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control.
So as a result, the landlords
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00:02:35,160 --> 00:02:38,200
didn't know how much they were
going to be making at the end of
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00:02:38,200 --> 00:02:41,360
the year and they were having a
hard time a, underwriting their
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00:02:41,360 --> 00:02:44,880
bottom line and B making any
money.
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00:02:45,040 --> 00:02:47,840
Now, if I were to put an
insurance graph up here, it
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00:02:47,840 --> 00:02:49,480
would look the exact same,
right?
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00:02:49,520 --> 00:02:52,600
Property taxes and insurance
across the country, but
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00:02:52,600 --> 00:02:55,600
specifically in Colorado, have
gone through the roof and
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00:02:55,600 --> 00:02:59,400
unfortunately landlords have put
it on the tenant to pay for
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00:02:59,400 --> 00:03:02,320
these changes.
And no, this is not negotiable.
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00:03:02,320 --> 00:03:04,040
Your landlord will not negotiate
this.
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00:03:04,200 --> 00:03:08,520
I'm promise you that.
Landlords are footing that bill
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00:03:08,520 --> 00:03:10,680
and they have enough and they
say that's it.
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We're separating this into our
two buckets, rent and triple net
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00:03:14,840 --> 00:03:18,240
expenses so we can actually
underwrite our properties and
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00:03:18,240 --> 00:03:22,920
understand at the end of the day
how much rent we are actually
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00:03:22,920 --> 00:03:25,280
making on this building.
Now I'm going to give you a
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00:03:25,280 --> 00:03:28,200
history lesson and the rise of
e-commerce.
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00:03:28,320 --> 00:03:31,040
Think about when the first time
you bought something online was
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00:03:31,360 --> 00:03:35,440
we'll say early 2000 tens,
right?
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00:03:35,760 --> 00:03:39,520
Great Recession hits and we are
starting to enter like eBay
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00:03:39,520 --> 00:03:42,640
world where you can buy
something online and it takes a
60
00:03:42,640 --> 00:03:44,280
few weeks to ship to you,
whatever.
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00:03:44,480 --> 00:03:49,080
Then comes Amazon, right?
And suddenly we're buying more
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00:03:49,080 --> 00:03:51,600
and more online, right?
This is the rise of e-commerce
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00:03:51,680 --> 00:03:53,920
commerce.
This is change in how our
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00:03:53,920 --> 00:03:57,920
society consumes products.
And we're all doing it at the
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00:03:57,920 --> 00:04:01,080
same time.
And then, boom, the pandemic
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00:04:01,080 --> 00:04:04,320
hits, It's 2020, and we're all
stuck at home.
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00:04:04,840 --> 00:04:11,080
And now we have people who never
went online to buy products, are
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00:04:11,080 --> 00:04:13,720
now online buying products.
I call this the Chewy effect.
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What is the Chewy effect?
March 2020 hits.
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The world shuts down.
My mom needs cat food but
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doesn't want to go to the store.
And I say, oh, OK mom, time to
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00:04:22,520 --> 00:04:25,360
get on Chewy.
Mom orders Chewy and she
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00:04:25,360 --> 00:04:29,440
subscribes and she gets her cat
food delivered to her door and
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she never has to leave her
house.
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00:04:31,400 --> 00:04:34,760
And she thinks to herself, wow,
this is unbelievably convenient.
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Therein lies the Chewy effect.
2020 pushed our society 10 years
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into the future when it comes to
e-commerce.
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As if we weren't already ramping
up as an e-commerce society.
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2020 just pushed us into the
future.
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OK?
Why does e-commerce have
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anything to do with what we're
talking about?
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Thought you'd never ask.
What happened to the supply of
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warehouses during the rise of
e-commerce is that more
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businesses started exiting their
retail expensive storefronts
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because their new storefronts
were digital and online and they
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started going into warehouses.
That means the demand for
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warehouses goes up.
What happened when demand goes
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up, supply comes down and the
landlords gain control.
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So now there's an inventory
issue in favor of the landlords.
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Now the landlords lead the show.
Now the landlords, because they
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had gross leases, didn't know
how much they were making at the
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end of the day.
But all of a sudden they had
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control of the inventory in the
market, and they want to know
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how much money they're making to
triple net leases.
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So now landlords are separating
rent and expenses into two
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different categories so they can
actually understand how much
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money they will make at the end
of the day.
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And this is how the triple net
lease was born.
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Today, 99% of warehouse leases
and retail leases I see are on a
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triple net basis, meaning the
tenant agrees to the rental
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figure and they also agree to
pay the taxes, insurance and the
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common area maintenance.
Even if the property taxes go
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up, Even if the insurance goes
up, the tenant is responsible
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for those variable expenses.
In summary, a triple net lease
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gets calculated in two different
buckets and equations, right?
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So when you have a rental
figure, you're going to
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calculate that first, right?
Say your rent is 10 bucks a foot
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and your warehouse is 1000
square feet.
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Now you do 10 times 1000.
That is 10,000.
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All right, so that's your rent.
Say your triple net expenses are
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$5 a foot, $5 * 1000 square feet
is $5000.
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Now you have your annual rent
for the year 10,000 and your
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expenses for the Year 5 thousand
$15,000 / 12.
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Now you have your monthly rent
and triple net expenses.
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Put them together.
This is gross.
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You add your rent plus your
triple net expenses, and that is
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how much you owe to your
landlord monthly for your rent
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and expenses.
You may be asking, what about my
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water bill?
What about my electricity and
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gas?
The tenant always pays for that.
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Even in residential, those
expenses get added on.
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But for the sake of this video,
we have our two buckets, our
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rent and our triple net
expenses.
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That means if you're leasing
commercial real estate, add them
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together to figure out your
annual rent and triple net
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expenses and then divide it by
12 to understand your monthly
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rent and expenses.
And if you're buying commercial
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real estate, you do not, you're
right, the triple net number
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when you're calculating NOI.
So say you're buying a building
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00:07:57,120 --> 00:08:01,080
and your rent is refer back to
the numbers we just used $10,000
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00:08:01,080 --> 00:08:05,880
a year, that is your NOI and
that is how we are valuing our
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commercial real estate if we're
buying.
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I'm not going to lie to you and
tell you this doesn't get way
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more complicated because it
does, but this is a high level
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understanding.
Big reminder, please read your
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leases.
Read them a few times.
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If you have questions, don't
hesitate to ask your landlord or
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00:08:21,240 --> 00:08:23,760
have attorney review.
If you love commercial real
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estate and want to learn more,
make sure to like, subscribe,
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00:08:26,680 --> 00:08:29,320
comment your questions.
Thanks for watching.
00:00:00,040 --> 00:00:03,360
Triple Net explained.
So you are doing something with
2
00:00:03,440 --> 00:00:06,440
commercial real estate and you
are seeing these three capital
3
00:00:06,480 --> 00:00:09,360
ends and you are thinking to
yourself, what are these?
4
00:00:09,520 --> 00:00:13,120
You might have leased a house or
apartment in the past.
5
00:00:13,160 --> 00:00:15,560
We'll just say it's $1000 a
month.
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00:00:15,800 --> 00:00:19,880
You sign the lease and you have
agreed to pay $1000 a month and
7
00:00:19,880 --> 00:00:22,400
every month you write a check
for 1000 bucks.
8
00:00:22,440 --> 00:00:27,440
This is called a gross lease.
A gross lease is a lease where
9
00:00:27,520 --> 00:00:31,800
all of the expenses are combined
with the rents.
10
00:00:31,880 --> 00:00:35,240
This is very common in
residential real estate.
11
00:00:35,480 --> 00:00:38,720
So you're renting an apartment,
you've got a gross lease.
12
00:00:38,720 --> 00:00:43,720
Now we understand what that is.
Now the three ends, you'll see
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00:00:43,920 --> 00:00:47,480
the way we refer to them is
triple net and it literally
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00:00:47,480 --> 00:00:52,720
stands for net, net, net.
When you are leasing commercial
15
00:00:52,720 --> 00:00:56,200
real estate or buying commercial
real estate, you will notice
16
00:00:56,200 --> 00:01:02,520
that 99.9% of the time your
leases have these three capital
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00:01:02,520 --> 00:01:07,960
NS net, net, net.
So gross leases are over here.
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00:01:08,240 --> 00:01:12,520
We're talking triple net today.
So what do the Nets actually
19
00:01:12,520 --> 00:01:18,040
stand for?
N1 stands for property taxes, N2
20
00:01:18,080 --> 00:01:24,800
stands for insurance and N3
stands for Cam common area
21
00:01:24,920 --> 00:01:28,240
maintenance.
Those are your 3 ends.
22
00:01:28,440 --> 00:01:36,120
So now we are thinking in two
buckets, one your rent only and
23
00:01:36,120 --> 00:01:40,800
the second bucket is going to be
your triple net expenses.
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00:01:41,120 --> 00:01:44,280
And in commercial real estate,
you need to calculate these
25
00:01:44,600 --> 00:01:47,040
separately.
So at this point, you're
26
00:01:47,040 --> 00:01:50,160
probably thinking to yourself,
why are we complicating this?
27
00:01:50,160 --> 00:01:52,200
Why can't I just have a gross
lease?
28
00:01:52,400 --> 00:01:57,760
The reason that landlords used
to do gross leases but no longer
29
00:01:57,760 --> 00:02:02,720
do, I'd say in like early 2000s
is when all the landlords across
30
00:02:02,720 --> 00:02:06,840
the United States went from
gross leases to net leases is
31
00:02:06,840 --> 00:02:10,320
because they didn't know how
much money they were going to
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00:02:10,320 --> 00:02:13,280
make with those triple net
expenses.
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00:02:13,320 --> 00:02:15,440
What does that mean?
So here I'm going to show you a
34
00:02:15,440 --> 00:02:20,200
graph.
This is how much property taxes
35
00:02:20,240 --> 00:02:24,040
have gone up for this one
building year over a year.
36
00:02:24,200 --> 00:02:29,560
OK, so landlords are seeing
property taxes, insurance going
37
00:02:29,560 --> 00:02:32,280
up, up and up.
These are expenses they cannot
38
00:02:32,280 --> 00:02:35,160
control.
So as a result, the landlords
39
00:02:35,160 --> 00:02:38,200
didn't know how much they were
going to be making at the end of
40
00:02:38,200 --> 00:02:41,360
the year and they were having a
hard time a, underwriting their
41
00:02:41,360 --> 00:02:44,880
bottom line and B making any
money.
42
00:02:45,040 --> 00:02:47,840
Now, if I were to put an
insurance graph up here, it
43
00:02:47,840 --> 00:02:49,480
would look the exact same,
right?
44
00:02:49,520 --> 00:02:52,600
Property taxes and insurance
across the country, but
45
00:02:52,600 --> 00:02:55,600
specifically in Colorado, have
gone through the roof and
46
00:02:55,600 --> 00:02:59,400
unfortunately landlords have put
it on the tenant to pay for
47
00:02:59,400 --> 00:03:02,320
these changes.
And no, this is not negotiable.
48
00:03:02,320 --> 00:03:04,040
Your landlord will not negotiate
this.
49
00:03:04,200 --> 00:03:08,520
I'm promise you that.
Landlords are footing that bill
50
00:03:08,520 --> 00:03:10,680
and they have enough and they
say that's it.
51
00:03:10,680 --> 00:03:14,840
We're separating this into our
two buckets, rent and triple net
52
00:03:14,840 --> 00:03:18,240
expenses so we can actually
underwrite our properties and
53
00:03:18,240 --> 00:03:22,920
understand at the end of the day
how much rent we are actually
54
00:03:22,920 --> 00:03:25,280
making on this building.
Now I'm going to give you a
55
00:03:25,280 --> 00:03:28,200
history lesson and the rise of
e-commerce.
56
00:03:28,320 --> 00:03:31,040
Think about when the first time
you bought something online was
57
00:03:31,360 --> 00:03:35,440
we'll say early 2000 tens,
right?
58
00:03:35,760 --> 00:03:39,520
Great Recession hits and we are
starting to enter like eBay
59
00:03:39,520 --> 00:03:42,640
world where you can buy
something online and it takes a
60
00:03:42,640 --> 00:03:44,280
few weeks to ship to you,
whatever.
61
00:03:44,480 --> 00:03:49,080
Then comes Amazon, right?
And suddenly we're buying more
62
00:03:49,080 --> 00:03:51,600
and more online, right?
This is the rise of e-commerce
63
00:03:51,680 --> 00:03:53,920
commerce.
This is change in how our
64
00:03:53,920 --> 00:03:57,920
society consumes products.
And we're all doing it at the
65
00:03:57,920 --> 00:04:01,080
same time.
And then, boom, the pandemic
66
00:04:01,080 --> 00:04:04,320
hits, It's 2020, and we're all
stuck at home.
67
00:04:04,840 --> 00:04:11,080
And now we have people who never
went online to buy products, are
68
00:04:11,080 --> 00:04:13,720
now online buying products.
I call this the Chewy effect.
69
00:04:13,720 --> 00:04:16,600
What is the Chewy effect?
March 2020 hits.
70
00:04:16,600 --> 00:04:19,800
The world shuts down.
My mom needs cat food but
71
00:04:19,800 --> 00:04:22,520
doesn't want to go to the store.
And I say, oh, OK mom, time to
72
00:04:22,520 --> 00:04:25,360
get on Chewy.
Mom orders Chewy and she
73
00:04:25,360 --> 00:04:29,440
subscribes and she gets her cat
food delivered to her door and
74
00:04:29,440 --> 00:04:31,240
she never has to leave her
house.
75
00:04:31,400 --> 00:04:34,760
And she thinks to herself, wow,
this is unbelievably convenient.
76
00:04:34,760 --> 00:04:40,600
Therein lies the Chewy effect.
2020 pushed our society 10 years
77
00:04:40,600 --> 00:04:43,200
into the future when it comes to
e-commerce.
78
00:04:43,200 --> 00:04:47,400
As if we weren't already ramping
up as an e-commerce society.
79
00:04:47,560 --> 00:04:51,040
2020 just pushed us into the
future.
80
00:04:51,040 --> 00:04:53,640
OK?
Why does e-commerce have
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00:04:53,640 --> 00:04:55,320
anything to do with what we're
talking about?
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00:04:55,760 --> 00:05:00,440
Thought you'd never ask.
What happened to the supply of
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00:05:00,440 --> 00:05:05,200
warehouses during the rise of
e-commerce is that more
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00:05:05,200 --> 00:05:09,920
businesses started exiting their
retail expensive storefronts
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00:05:09,920 --> 00:05:13,200
because their new storefronts
were digital and online and they
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00:05:13,200 --> 00:05:16,880
started going into warehouses.
That means the demand for
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00:05:16,880 --> 00:05:19,960
warehouses goes up.
What happened when demand goes
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00:05:19,960 --> 00:05:24,920
up, supply comes down and the
landlords gain control.
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00:05:24,920 --> 00:05:29,680
So now there's an inventory
issue in favor of the landlords.
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00:05:30,080 --> 00:05:33,760
Now the landlords lead the show.
Now the landlords, because they
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00:05:33,760 --> 00:05:36,800
had gross leases, didn't know
how much they were making at the
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00:05:36,800 --> 00:05:38,400
end of the day.
But all of a sudden they had
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00:05:38,400 --> 00:05:41,480
control of the inventory in the
market, and they want to know
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00:05:41,480 --> 00:05:45,320
how much money they're making to
triple net leases.
95
00:05:45,560 --> 00:05:50,440
So now landlords are separating
rent and expenses into two
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00:05:50,440 --> 00:05:54,240
different categories so they can
actually understand how much
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00:05:54,240 --> 00:05:56,680
money they will make at the end
of the day.
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00:05:56,800 --> 00:06:00,200
And this is how the triple net
lease was born.
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00:06:00,360 --> 00:06:06,200
Today, 99% of warehouse leases
and retail leases I see are on a
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00:06:06,200 --> 00:06:09,320
triple net basis, meaning the
tenant agrees to the rental
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00:06:09,320 --> 00:06:14,440
figure and they also agree to
pay the taxes, insurance and the
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00:06:14,440 --> 00:06:18,200
common area maintenance.
Even if the property taxes go
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00:06:18,200 --> 00:06:21,800
up, Even if the insurance goes
up, the tenant is responsible
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00:06:21,800 --> 00:06:26,360
for those variable expenses.
In summary, a triple net lease
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00:06:26,400 --> 00:06:30,960
gets calculated in two different
buckets and equations, right?
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00:06:31,040 --> 00:06:33,240
So when you have a rental
figure, you're going to
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00:06:33,240 --> 00:06:37,120
calculate that first, right?
Say your rent is 10 bucks a foot
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00:06:37,360 --> 00:06:40,160
and your warehouse is 1000
square feet.
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00:06:40,160 --> 00:06:44,640
Now you do 10 times 1000.
That is 10,000.
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00:06:44,880 --> 00:06:48,280
All right, so that's your rent.
Say your triple net expenses are
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00:06:48,440 --> 00:06:54,920
$5 a foot, $5 * 1000 square feet
is $5000.
112
00:06:54,920 --> 00:07:00,440
Now you have your annual rent
for the year 10,000 and your
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00:07:00,440 --> 00:07:05,880
expenses for the Year 5 thousand
$15,000 / 12.
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00:07:06,360 --> 00:07:10,360
Now you have your monthly rent
and triple net expenses.
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00:07:10,560 --> 00:07:12,600
Put them together.
This is gross.
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00:07:12,960 --> 00:07:16,640
You add your rent plus your
triple net expenses, and that is
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00:07:16,840 --> 00:07:20,960
how much you owe to your
landlord monthly for your rent
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00:07:21,480 --> 00:07:23,840
and expenses.
You may be asking, what about my
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00:07:23,840 --> 00:07:26,240
water bill?
What about my electricity and
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00:07:26,240 --> 00:07:28,160
gas?
The tenant always pays for that.
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00:07:28,240 --> 00:07:31,040
Even in residential, those
expenses get added on.
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00:07:31,160 --> 00:07:34,240
But for the sake of this video,
we have our two buckets, our
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00:07:34,240 --> 00:07:36,520
rent and our triple net
expenses.
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00:07:36,680 --> 00:07:39,480
That means if you're leasing
commercial real estate, add them
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00:07:39,480 --> 00:07:44,280
together to figure out your
annual rent and triple net
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00:07:44,280 --> 00:07:47,440
expenses and then divide it by
12 to understand your monthly
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00:07:47,440 --> 00:07:49,800
rent and expenses.
And if you're buying commercial
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00:07:49,800 --> 00:07:53,080
real estate, you do not, you're
right, the triple net number
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00:07:53,200 --> 00:07:57,120
when you're calculating NOI.
So say you're buying a building
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00:07:57,120 --> 00:08:01,080
and your rent is refer back to
the numbers we just used $10,000
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00:08:01,080 --> 00:08:05,880
a year, that is your NOI and
that is how we are valuing our
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00:08:05,880 --> 00:08:08,040
commercial real estate if we're
buying.
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00:08:08,320 --> 00:08:10,840
I'm not going to lie to you and
tell you this doesn't get way
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00:08:10,840 --> 00:08:13,640
more complicated because it
does, but this is a high level
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00:08:13,640 --> 00:08:17,000
understanding.
Big reminder, please read your
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00:08:17,000 --> 00:08:18,760
leases.
Read them a few times.
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00:08:18,760 --> 00:08:21,240
If you have questions, don't
hesitate to ask your landlord or
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00:08:21,240 --> 00:08:23,760
have attorney review.
If you love commercial real
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00:08:23,760 --> 00:08:26,360
estate and want to learn more,
make sure to like, subscribe,
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00:08:26,680 --> 00:08:29,320
comment your questions.
Thanks for watching.
