What Is a NNN (Triple Net) Lease?

What is a NNN lease? A triple net (NNN) lease is a commercial lease in which the tenant pays base rent plus its pro-rata share of property taxes, building insurance and maintenance, on top of that base rent. Those three cost categories are the three "nets"; they are billed separately from the quoted rent, so the number on a listing is not the occupancy cost.

This guide is for people who are not used to US commercial leases — foreign businesses opening a first US warehouse, and domestic operators signing their first industrial lease. It explains what NNN means in plain language, how the share is calculated, how NNN differs from a gross or modified-gross lease, and what to ask a landlord before you sign. For the rest of occupancy cost beyond NNN, see True Cost of Warehouse Space. To run the arithmetic on your figures, use the NNN lease calculator. Defined terms also sit in the glossary.

What is a NNN (triple net) lease?

NAIOP's Commercial Real Estate Terms and Definitions (2024) defines a triple net (NNN) lease as "a lease agreement whereby the tenant pays taxes, maintenance and property insurance as well as all operating costs associated with the tenant's occupancy, including personal property taxes, janitorial services and utility costs." The same entry states: "The landlord is typically responsible for the roof, HVAC, structure and sometimes the parking lot."

NAIOP's Common Lease Types Matrix puts the same idea in one line: under triple net, the tenant "pays all operating expenses, taxes and insurance," and the landlord "is frequently responsible for HVAC, structure, roof" and "occasionally responsible for parking lot."

Two consequences follow for a warehouse search.

The quoted rent is base rent. NAIOP's tenant definition of occupancy cost includes rent and "their pro rata share of any operating costs (e.g., taxes, insurance, common area maintenance)," plus personal property taxes and tenant insurance. Comparing buildings on the quoted rate alone leaves those operating costs out.

The lease, not the label, controls. NAIOP's net-lease definition states that disclosure of the specific expenses to be paid directly by the tenant "is required" (this is a definition in an industry glossary, not a statute). Read the operating-expense exhibit. Two leases both called NNN can pass through different lists.

Link Logistics, a US industrial landlord, describes NNN as the standard lease structure in industrial real estate, with tenants paying base rent plus property taxes, building insurance and maintenance (Link Logistics, "Triple Net Leases in Industrial Real Estate," updated August 2026). Treat that as one large landlord's description of its product type, not a legal rule.

Prologis, a publicly listed industrial REIT, stated in its Form 10-K for the year ended 31 December 2025 (filed 13 February 2026) that it collects rent "through operating leases, including reimbursements for the majority of our property operating costs," and that "generally, under the terms of our leases, the majority of our rental expenses are recovered from our customers, including common area maintenance, real estate taxes and insurance." That is how Prologis describes recovering operating costs from customers in its filing. It is not a promise about your building.

What does a NNN lease include? The three nets

The name is the list. Under NAIOP's NNN definition and matrix, the tenant pays:

1. Taxes — in this structure, the real estate taxes on the property. Link Logistics describes the property-tax net as the tenant's share of real estate taxes on the building and land. That is a pass-through of the building's property tax, which is not the same levy as inventory / business personal property tax on the stock you hold inside the building. You can owe both. See Inventory and Property Tax by State for the inventory tax, and do not assume a freeport exemption on goods changes the real-estate tax in the NNN bill.

2. Building insurance — the landlord's property insurance, passed through. Prologis's 2025 10-K states that "the costs to insure our properties are primarily covered through expense reimbursements from our customers." That recovery is separate from the policies a landlord will require you to carry (your liability, your contents, workers' compensation). Budget both.

3. Maintenance — NAIOP's NNN definition has the tenant pay "taxes, maintenance and property insurance". Link Logistics describes the maintenance net as "upkeep and repairs tied to the leased space" and describes CAM separately, as the cost of maintaining "areas and systems that are shared across a property rather than dedicated to a single tenant's space." How a lease divides the two is a lease term — read the definitions.

What are CAM charges and other pass-throughs?

NAIOP's NNN definition does not stop at the three nets. It also assigns to the tenant "all operating costs associated with the tenant's occupancy, including personal property taxes, janitorial services and utility costs." NAIOP defines common area as the generally accessible areas available for use by all tenants — in an office building, washrooms, elevator lobbies and public corridors, with "similar structures in an industrial building," and notes it "may include parking lot and landscaped areas."

Prologis's 2025 10-K lists, among rental expenses, "the cost of our property management and leasing personnel, utilities, repairs and maintenance, property insurance, real estate taxes and the other costs of managing our properties," and states that generally the majority of those rental expenses are recovered from customers.

Link Logistics, describing typical CAM charges in an industrial NNN lease, lists parking-lot and drive-aisle maintenance, exterior and site lighting, landscaping and irrigation, snow and ice removal where applicable, common-area utilities, property management fees, striping, signage and shared security systems. The same page states that CAM generally excludes costs tied to a tenant's own leased space — interior repairs, dock equipment the tenant contracts for itself, or capital improvements to that unit — and that how a given lease defines "capital" versus "maintenance" varies and should be confirmed before signing.

This guide does not treat any of those extra lines as automatic. They are included only where a source names them, and your lease can add, drop or recategorise them. If a landlord quotes a management fee on top of CAM, ask whether it is already inside the CAM pool. The NNN lease calculator has an optional management-fee field for when your statement shows it separately; if it is already inside CAM, leave that field blank.

How is a NNN lease calculated? Your pro-rata share

NAIOP defines pro rata expense share as "the percentage that a tenant pays of reimbursable expenses; usually, but not always, calculated by dividing the net rentable area of a tenant's leased premises by the net rentable area of the building." Expense stops and other lease terms, NAIOP adds, impact this calculation, so confirm both the numerator and the denominator in the lease. A smaller denominator would give a larger percentage.

In other words, the usual formula is:

pro-rata share = tenant rentable square feet ÷ building rentable square feet

That percentage is then applied to the building's reimbursable expenses (taxes, insurance, CAM, and whatever else the lease puts in the pool). NAIOP's 2017 edition of the same glossary said the same thing and noted that, on a gross lease, reimbursable expenses are taken "less an expense stop."

Rentable area is not a casual measurement. NAIOP defines rentable building area (RBA) as "the total square footage of a building that can be occupied by or assigned to a tenant for the purpose of determining a tenant's total rental obligation," and notes that RBA generally includes common areas (hallways, lobbies, bathrooms and phone/data closets). BOMA International publishes ANSI/BOMA Z65.2-2025, Standard Method of Measurement for industrial and flex buildings. BOMA's public description of that standard states that it generates load factors for shared space types and that the Global Summary of Areas "allocates shared space among occupants and calculates rentable area." Ask which measurement standard was used for the figures in your lease; do not assume BOMA, and do not assume the listing's square footage matches the lease's rentable area.

Worked example (illustrative ratios only)

These figures are labelled ILLUSTRATIVE. They are a ratio, not a market rent, not a typical NNN cost, and not a claim about any submarket.

Suppose your suite is 20,000 rentable square feet in a building of 100,000 rentable square feet, and the lease uses NAIOP's usual formula with no unusual denominator:

20,000 ÷ 100,000 = 20% pro-rata share.

You would then pay 20% of whatever the lease defines as the building's reimbursable taxes, insurance and CAM for that year. If the recoverable pool later rises because the tax assessment moved, your 20% is applied to the new total — the share stays 20% unless the areas change; the dollars do not stay put.

A tenant in 8,000 rentable square feet of the same 100,000 square-foot building would have an 8% share under the same formula. Two tenants in one building do not pay the same NNN bill.

To apply this to a real statement, put your suite size, your building size and your expense totals into the NNN lease calculator. The calculator ships with empty inputs. It does not suggest market rates.

NNN vs gross lease (and modified gross)

NAIOP's 2024 Common Lease Types Matrix is the comparison:

• Gross (full-service). "Landlord pays all of the operating expenses and taxes." NAIOP's gross-lease definition: "a lease contract in which a landlord receives stipulated rent from a tenant and is obligated to pay all the property's operating expenses and real estate taxes." Synonym: full-service lease. Disclosure of the specified costs of operation is required in some states.

• Modified gross. "Expenses are divided between tenant and landlord in a predetermined manner." Costs "may include an expense stop." Also called semi-gross, net-net or double net. NAIOP's "modified lease" entry: the landlord receives a stipulated rent, "and payment of the property's operating expenses is divided between the lessor and lessee via specified terms in the lease."

• Net. "Tenant pays all operating expenses." The landlord must disclose the tenant's responsibility in the lease.

• Triple net (NNN). "Tenant pays all operating expenses, taxes and insurance."

A gross quote and an NNN quote are not comparable until you add the nets to the NNN side (or subtract the equivalent from the gross side). The true cost of warehouse space walkthrough is the place to put NNN next to escalations, build-out and restoration. If you are still choosing between a lease and a 3PL, see 3PL vs leasing your own warehouse and the 3PL vs lease calculator.

CAM reconciliation: estimates vs the year-end true-up

Link Logistics states that under an NNN lease, CAM "is typically reconciled annually against actual expenses, with the tenant paying estimated CAM charges throughout the year and any difference trued up once final costs are known." That true-up is CAM reconciliation. Whether your taxes and insurance work the same way is set by the lease. The lease sets how a shortfall is billed or an overpayment is returned.

Two practical results, which this guide flags as budgeting points rather than as legal rules:

• Budgeting the first year's estimate as if it were fixed leaves you exposed when actual costs come in higher. Taxes, insurance and CAM can each come in above the estimate; the lease sets how the difference is billed.
• The timetable, the form of the statement, and what happens if the landlord is late are lease terms. They are not implied by the letters "NNN." Ask for them in writing.

What to ask a landlord before signing

These questions are this guide's recommended checklist. Each sits on a sourced mechanism above; none of them is a statutory right.

1. What is in the recoverable pool? Ask for an itemised list, not the word "NNN." NAIOP's net-lease definition states that disclosure of the specific expenses to be paid directly by the tenant "is required" (this is a definition in an industry glossary, not a statute). Link Logistics advises confirming the capital-versus-maintenance line before signing.

2. What is my pro-rata share, on which areas? Tenant rentable square feet, building rentable square feet, and any exclusions from the denominator. Ask which measurement standard produced those areas.

3. Caps on controllable CAM. Link Logistics notes that tenants can sometimes negotiate CAM caps (limiting how much CAM charges can increase year over year). Ask which lines, if any, are capped.

4. Audit rights. Link Logistics describes audit rights as the ability to review the landlord's expense records. Ask whether the lease gives you audit rights.

5. Exclusions. Ask, in writing, whether capital expenditure, structural repair, roof replacement, leasing commissions and costs of vacant space sit inside CAM. Link Logistics states that capital-versus-maintenance definitions vary by lease.

6. Expense stop. NAIOP states that expense stops and other lease terms impact the pro-rata calculation, and that modified-gross costs may include an expense stop. If this lease is modified gross rather than NNN, ask how any expense stop is set.

7. Reconciliation mechanics. When is the annual statement due? Link Logistics says CAM is typically reconciled annually against actual expenses, with the tenant paying estimated CAM charges through the year; whether your taxes and insurance work the same way is set by the lease. Link Logistics' warehouse-lease red-flag note is to ask for an itemised breakdown, whether administrative fees are capped, and how year-end reconciliation works.

8. Does free rent cover NNN? Ask whether any rent abatement covers NNN charges as well as base rent. Pin that down in the letter of intent; see how to negotiate a warehouse lease.

Put the commercial answers in the LOI, then have a US real estate lawyer read the operating-expense exhibit. The LOI is covered in the negotiation guide; this page is only the NNN slice.

Calculators and related reading

• NNN lease calculator — pro-rata share, tenant NNN, and occupancy cost from your suite, building and expense figures. No market rates are prefilled.
• All tools — pallet positions, warehouse size, 3PL vs lease, opening cost.
• 3PL vs lease calculator — once you have an NNN number, compare the lease against a 3PL on the same footing.
• True cost of warehouse space — escalations, TI, restoration, cost per pallet position.
• How to negotiate a warehouse lease — LOI terms, HVAC, expansion rights.
• How much does it cost to open a warehouse — deposit, racking, WMS, rent during fit-out.
• Warehouse insurance requirements — your policies, distinct from the landlord's building insurance in the NNN bill.
• Inventory and property tax by state — tax on the goods, distinct from real estate tax in the NNN bill.
• 3PL vs leasing your own warehouse — when NNN plus the rest of in-house cost still loses to a 3PL.

Sources

• NAIOP Research Foundation, Commercial Real Estate Terms and Definitions (2024) — NNN, gross, modified lease, net lease, occupancy cost, pro rata expense share, common area, rentable building area, Common Lease Types Matrix
• NAIOP Research Foundation, Commercial Real Estate Terms and Definitions (2017) — pro rata share taken against reimbursable expenses less an expense stop on a gross lease
• Prologis, Inc., Form 10-K for the year ended 31 December 2025 (filed 13 February 2026) — customer reimbursements of the majority of property operating costs, including CAM, real estate taxes and insurance; property insurance recovered from customers; rental expenses include property management personnel, utilities, repairs and maintenance
• Link Logistics, Triple Net Leases in Industrial Real Estate (updated August 2026) — industrial NNN as base rent plus taxes, insurance and maintenance; typical CAM lines including property management fees; annual estimate-and-reconcile / true-up; CAM caps and audit rights as negotiable; capital-versus-maintenance confirmed in the lease
• Link Logistics, Warehouse Lease Red Flags — itemised operating expenses, administrative-fee caps, year-end reconciliation
• BOMA International, BOMA Standards — ANSI/BOMA Z65.2-2025 industrial measurement standard; load factors for shared space; Global Summary of Areas allocates shared space among occupants and calculates rentable area

This guide is general information, not legal or financial advice. Operating-expense definitions, measurement standards and reconciliation mechanics are lease-specific; confirm them in the document you would sign and with qualified US counsel.