It’s easy to get confused by lease rates if you’re not in the real estate business; it’s actually confusing even if you are. There are many types of leases but I’ll confine my remarks to the types used most often in commercial leasing. As a tenant you have to understand these basic lease types in order to compare rates. There are two basic types of leases: Gross and Net, but lot’s of variations in between.

I’ll start with the simplest type (includes no amenities) and move towards the more complicated includes all building amenities.

Absolute Net Lease: Sometimes referred to as a “Bond Type Lease” because, like a bond, income flows to the owner who has no responsibility to the property or tenant. This is most common with build-to-suit single tenant properties. The tenant pays rent to the Landlord and then pays all expenses associated with the property including replacement of mechanical systems, roof and structure of the building.

Net Lease: Sometimes called a triple net lease. Tenant pays rent to the landlord and all expenses except replacement of roof or structure of building. There are many variations of this type so it’s okay to ask what is or is not covered, i.e. the lease may have the tenant responsible for replacement of mechanical systems if they go bad. For purposes of rate comparison it’s enough to know it’s a net lease. Used almost exclusively in retail and industrial leasing but sometimes new medical and professional office buildings.

Gross Lease: In this type of lease most expenses are included in the rent. There are many variations to this type of lease and, as a result, more confusion. The tenant may pay their own utilities or cleaning, they may pay taxes but nothing else. When the tenant pays some of the expenses we call this a “modified gross Lease”. You have to ask what’s included in the rent. Very common in class B and C (multi-tenant older buildings) office leases, sometimes used in industrial properties.

Full Service Lease: This is a Gross Lease used almost exclusively in class A (newer muti-tenant buildings) office leasing. The lease rate includes every expense associated with the property including nightly cleaning of individual suites and on-site property management. This lease may also provide on-site security, back up generators and sophisticated fire suppression systems. The point is the tenant is not billed for any of these services or taxes, insurance, utilities, etc. There could be charges for extra maintenance on an hourly bases if the tenant need some repair within their suite.

- Bill Low, VP
 

Out of the many calls we receive here at SDP, one of the most commonly asked question we receive is what does NNN charges mean?

Triple net (NNN) means the tenant pays towards all taxes, insurance, and  common area maintenance (CAM) expenses, in addition to rent. Typically, the landlord pays these fees up front and then, in turn, charges the tenant for this in their monthly lease rate.

When comparing places to lease, it is important to know what those triple net charges will total, so that you can compare with other spaces and budget accordingly.

Evan Plotkin calls it the “Greenwich Village mentality.” By that he means cultivation of a development strategy grounded in the theory that Springfield must become a place where people will want to live, work, and play — as in that New York City neighborhood. Outspoken advocates such as Plotkin, president of Samuel D. Plotkin and Associates, say the key to creating such an environment is artists, who will come to inexpensive, even derelect properties if the opportunities present themselves, and, if they come in sufficient numbers, can spur progress. That’s the theory; the question is how to put it to the test.

Click here to read full story > Can Artists Spur Progress in Springfield’s Downtown?

Click here to read an interview with President of NAI Samuel D. Plotkin and Associates at Urban Compass > http://urbancompass.net/?p=1327