A triple net lease (NNN) is a commercial lease where the tenant pays base rent plus their pro rata share of property taxes, building insurance, and common area maintenance (CAM). The landlord gets a relatively predictable rent check while the tenant absorbs most of the operating cost risk.
Tenant's Total Rent = Base Rent + Property Taxes + Insurance + CAMA Nashville retail tenant paying $25/SF base rent plus $7/SF in NNN charges is effectively paying $32/SF all-in.
Tyler's take
NNN leases are the backbone of single-tenant retail and a lot of multi-tenant shopping centers, and they're usually sold to investors as "mailbox money." I want to push back on that framing, because there's a spectrum here that matters.
On one end you have a true absolute NNN lease with an investment-grade tenant like Walgreens or Dollar General on a 15-year term. That's as close to a bond as commercial real estate gets. On the other end you have a "NNN" lease with a local tenant on a 5-year term where the landlord still chases reimbursements and eats shortfalls. Same two letters, wildly different deals.
When I underwrite a NNN deal, the three questions I ask before I care about the cap rate are: who's the tenant, what's the remaining lease term, and what does the landlord actually still own (roof? structure? parking lot?). A "NNN" lease that carves out roof and structure is really a double-net lease and should be priced as one.
How it works
Tenant pays base rent per square foot, usually with annual escalators (2-3% or CPI).
Landlord bills the three nets: taxes, insurance, and CAM, either as monthly estimates or year-end true-ups.
Year-end reconciliation. Landlord trues up estimates vs actuals.
Capital items are negotiated. Absolute NNN puts roof and structure on the tenant. Standard NNN keeps them with the landlord.
Worked example: 5,000 SF Nashville strip tenant, 10-year lease, $22/SF base rent, $6/SF NNN. Annual base rent $110,000. Annual NNN $30,000. Total year-one rent $140,000 ($28/SF all-in).
NNN vs modified gross vs full-service gross
Lease Type Tenant Pays Landlord Pays Full-Service Gross Base rent only Taxes, insurance, CAM, utilities Modified Gross Base + some expenses Varies Double Net (NN) Base + taxes + insurance CAM, roof, structure Triple Net (NNN) Base + taxes + insurance + CAM Roof and structure (usually) Absolute NNN Everything Nothing
Common mistakes
Confusing NNN with absolute NNN. Read the lease, not the cover page.
Ignoring reconciliation risk with weak tenants.
Buying short-term NNN at long-term NNN cap rates.
Not auditing CAM reconciliations.
FAQs
What does NNN stand for? Triple net, referring to property taxes, insurance, and common area maintenance.
Who pays for the roof in a NNN lease? Usually the landlord, unless it's an absolute NNN lease. Verify in the actual lease.
How are NNN charges calculated? Landlord totals actual taxes, insurance, and CAM, then allocates to tenants by pro rata square footage.