When it comes to commercial real estate, there are many different types of leases available. One of the most popular is the triple net lease, which is also known as a “NNN” lease. This type of lease is often favored by both landlords and tenants for a variety of reasons. In this article, we’ll take a closer look at what a triple net lease is, and explore some of the reasons why you might want to consider this type of lease for your commercial property.
What is a Triple Net Lease?
A triple net lease is a type of commercial lease agreement in which the tenant is responsible for paying not only the base rent, but also a portion of the property’s operating expenses. These expenses typically include property taxes, insurance, and maintenance costs. The landlord is responsible for structural repairs and improvements to the property, but the tenant is responsible for any repairs or improvements within their leased space.
Under a triple net lease, the tenant takes on a significant amount of financial responsibility. However, this also gives the tenant greater control over the property and allows them to tailor their space to their specific needs. Additionally, triple net leases typically have lower base rental rates than other types of leases, which can make them an attractive option for tenants.
Reasons to Consider a Triple Net Lease
1. Predictable Expenses
One of the biggest advantages of a triple net lease is that the tenant has a clear understanding of their expenses. Because the tenant is responsible for paying a portion of the property’s operating expenses, they have a predictable monthly cost that they can plan for. This can help businesses better manage their budgets and avoid unexpected expenses.
2. Greater Control
Another advantage of a triple net lease is that it gives the tenant greater control over their space. Because the tenant is responsible for repairs and improvements within their leased space, they have the ability to tailor the space to their specific needs. This can be particularly beneficial for businesses with specialized equipment or unique space requirements.
3. Lower Base Rental Rates
As mentioned earlier, triple net leases typically have lower base rental rates than other types of leases. This can make them an attractive option for businesses that want to save money on their monthly rent payments. Additionally, because the tenant is responsible for a portion of the property’s operating expenses, the landlord may be more willing to negotiate on the base rental rate.
4. Long-Term Stability
Triple net leases are often used for long-term leases, with terms ranging from 10 to 20 years or more. This can provide businesses with long-term stability and predictability. Additionally, because triple net leases are typically used for larger properties, there may be fewer vacancies and turnover, which can provide added stability for businesses.
5. Investment Opportunities
Finally, triple net leases can be attractive to investors who are looking for a stable, long-term investment. Because the tenant is responsible for a portion of the property’s operating expenses, the landlord has a more predictable stream of income. Additionally, because triple net leases are often used for larger properties, they may be more attractive to institutional investors.
Conclusion
While a triple net lease may not be the right choice for every business, it can offer a number of advantages for both landlords and tenants. From predictable expenses to greater control over the space, there are many reasons why you might want to consider a triple net lease for your commercial property. If you’re interested in learning more about triple net leases, speak with a commercial real estate professional to determine if this type of lease is right for you.
