Apex Real Estate Services · DRE #01422904 · CCIM-Led
Hemet, CA · (951) 977-3251
How NNN leases work, who pays for what, and the pros and cons — explained by Inland Empire commercial real estate experts.
If you have seen a commercial listing quoting “$20 NNN,” you have already met the most common lease structure in commercial real estate. Triple net leases dominate retail, industrial, and single-tenant net-lease investments — including most industrial product across the Inland Empire. Here is exactly how they work.
NNN refers to the three expense categories — the three nets — that pass from landlord to tenant on top of base rent:
Add those three to base rent and you get the tenant’s total occupancy cost. The word net means the landlord’s rent is net of these expenses — they are the tenant’s responsibility, not the owner’s.
NNN rents are quoted as base rent plus estimated NNN expenses, almost always per square foot. Here is an Inland Empire-style example for a 10,000 SF industrial suite:
| Component | Per SF / Year | Annual (10,000 SF) |
|---|---|---|
| Base rent | $20.00 | $200,000 |
| NNN expenses (taxes + insurance + CAM) | $6.00 | $60,000 |
| Total occupancy cost | $26.00 | $260,000 (~$21,667/mo) |
So when a broker says “$20 NNN,” the $20 is just base rent. The NNN load — here about $6/SF — is billed on top, usually as a monthly estimate reconciled against actual expenses once a year. Always ask for the NNN figure before comparing listings: a $20 NNN space and a $24 gross space can cost nearly the same.
Key Takeaway: In an NNN lease the quoted rate is only part of the cost. Your true occupancy expense is base rent plus taxes, insurance, and CAM — and that NNN load can move year to year.
Triple net is one point on a spectrum of types of commercial leases and how operating costs get split:
| Lease Type | Who Pays Operating Costs | Base Rent | Best For |
|---|---|---|---|
| Gross / Full-Service | Landlord pays taxes, insurance, CAM | Highest | Office tenants wanting one number |
| Modified Gross | Split — some landlord, some tenant | Middle | Office / flex, negotiated |
| Triple Net (NNN) | Tenant pays all three nets | Lower | Retail, industrial, single-tenant |
| Absolute Net (Bondable) | Tenant pays everything, incl. roof & structure | Lowest | Credit-tenant net-lease investments |
The exact split is negotiable and written into the lease, but a standard vanilla NNN deal usually breaks down like this:
| Expense | Tenant | Landlord |
|---|---|---|
| Base rent | — | Collects |
| Property taxes | Pays | No |
| Building insurance | Pays | No |
| CAM / common areas | Pays | No |
| Interior maintenance & HVAC | Usually pays | Sometimes |
| Roof & structure | Often excluded | Often retains |
Watch the roof and structure. In a standard NNN lease the landlord frequently keeps the roof, foundation, and load-bearing walls. In an absolute net lease, even those shift to the tenant — a critical distinction when underwriting a deal.
The biggest risk in any triple net lease is the part you do not control: the NNN load itself. Tax reassessments (especially after a sale), insurance market hardening, and deferred-maintenance CAM catch-ups can push the real rent well above the quoted base. Smart tenants negotiate CAM caps, audit rights, and clear exclusions; smart investors stress-test the NNN underwriting before they buy.
The Inland Empire is one of the largest industrial markets in the country, and the overwhelming majority of its warehouse, distribution, and flex space trades on triple net terms. For owner-users and investors across Ontario, Fontana, Riverside, San Bernardino, and Moreno Valley, understanding the NNN load — and how taxes reassess on a sale — is often the difference between a deal that pencils and one that does not.
That is where CCIM-level analysis matters. At Apex Real Estate Services we model full occupancy cost and net-lease economics on every engagement, so owners and tenants see the real number, not just the headline rate.
What is the downside of a triple net lease?
For tenants, the main downside is exposure to variable operating costs — taxes, insurance, and CAM can rise year to year, and an annual reconciliation can trigger an unexpected true-up bill. For investors, the downside is concentrated vacancy risk on long single-tenant terms.
What does $20 NNN mean?
The $20 is base rent per square foot per year. NNN means the tenant also pays the three nets — taxes, insurance, and CAM — on top. If NNN expenses run $6/SF, true occupancy cost is about $26/SF.
Who pays for repairs in an NNN lease?
Generally the tenant covers most operating and maintenance repairs (interior, HVAC, common areas). In a standard NNN lease the landlord often retains the roof and structure; in an absolute net lease the tenant takes even those.
Is a triple net lease good for the tenant or the landlord?
It favors the landlord or investor through predictable, low-management income, but it can benefit tenants too via lower base rent, cost transparency, and operational control — especially when CAM caps and audit rights are negotiated.
This article is general educational information, not legal, tax, or investment advice. Lease terms vary — always review the specific lease and consult qualified professionals. Apex Real Estate Services · Robert Mendieta Jr., CCIM · DRE #01422904 · (951) 977-3251.
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