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3 Responses to “would someone please explain to me NNN in commercial real estate?”

1. newmexicorealestateforms on February 27th, 2010 at 4:04 pm

   lol, unlike popular belief it does not signify cripled M & M’s it means triple net leases which means in basic terms and without getting into specifics that the renter will pay all expenses of maintenance including taxes and insurance.

2. realestatelawyer on February 27th, 2010 at 4:17 pm

   NNN stands for “net net net”, also known as “triple net”. This means that, in addition to paying basic rent to the landlord, the tenant also pays its proportionate share of the landlord’s costs for taxes, common area maintenance and insurance for the shopping center.

   The tenant’s share is determined by figuring out how much space the tenant rents in relation to the total amount of space available for rent in the shopping center. If the tenant rents 10% of the shopping center then the tenant must pay 10% of the landlord’s real estate taxes, 10% of the landlord’s insurance premium and 10% of the landlord’s costs for maintaining the shopping center (like snow removal costs, parking lot cleanup, etc.).

3. tnbroker1 on February 27th, 2010 at 5:06 pm

   In commercial real estate the tenant pays a prorated additional fee above the rental rate. It is based upon the percentage ratio of the facilities they occupy that includes, taxes, insurance and common area maintenance. That means that the tenant shares in the cost of the parking lot maintenance, landscaping, exterior items. Tenants usually also are responsible for their portion of HVAC repairs and maintenance. Typically, the tenant pays for what they use.

   So if a Lessee occupies 31% of a building they pay 31% of the taxes and insurance costs. I charge a Lessee rents per BOMA standards and include the area from the exterior to the middle of the interior walls and a portion of the common area, as they have to use the hallways restrooms, elevator, stairways etc and that has to be accounted for somewhere.

   Any special needs also are billed back to the Lessee, like add a kitchen, move a wall, add a door, etc. Most often these are paid for by the Lessee at the time of completion, but sometimes amortized over the life of the lease.

   So you may be quoted a rate of $15.00 per sq ft, plus “pass thur” costs of $3.00 per sq ft. giving an effective rate of $18.00 rent costs to Lessee.

   Bottom line, all rents are “net” to Lessor.

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