Apex Real Estate Services · DRE #01422904 · CCIM-Led
Hemet, CA · (951) 977-3251
Gross, modified gross, net, percentage, ground — every commercial lease type explained, who pays what, and how to choose the right one.
Every commercial lease answers one question: who pays the operating costs of the building? The answer is what separates one lease type from another — and it can swing your true occupancy cost by dollars per square foot. This guide maps every common commercial lease structure on that spectrum, with a plain-English summary of each and a link to a deep-dive guide.
Key Takeaways
Most commercial leases fall on a sliding scale from fully landlord-paid to fully tenant-paid:
Two specialty structures sit outside the spectrum: the percentage lease (common in retail) and the ground lease (for land). Here is how all of them compare:
| Lease Type | Who Pays Operating Costs | Base Rent | Best For |
|---|---|---|---|
| Gross / Full-Service | Landlord (all) | Highest | Office, smaller tenants |
| Modified Gross | Split (base year) | Middle | Multi-tenant office, flex |
| Triple Net (NNN) | Tenant (all 3 nets) | Lower | Retail, industrial, single-tenant |
| Absolute Net | Tenant (everything) | Lowest | Credit-tenant net-lease |
| Percentage | Base rent + % of sales | Lower base | Retail, malls |
| Ground | Tenant (leases land, owns building) | Land rent | Long-term development |
In a gross lease, the tenant pays one all-inclusive rent and the landlord covers the property’s operating costs — taxes, insurance, and maintenance. It is the simplest, most predictable structure for a tenant, and the most common in multi-tenant office buildings. The trade-off is a higher base rent. Learn more in our gross lease vs net lease guide.
A modified gross lease splits operating costs between landlord and tenant — the tenant pays base rent plus some agreed expenses (often in-suite utilities and janitorial), while the landlord covers the rest, usually governed by a base year. It is the middle ground between gross and net, and dominates multi-tenant office and flex space. See our full modified gross lease guide.
In a net lease, the tenant pays operating costs on top of a lower base rent. The number of “nets” tells you how many cost categories the tenant absorbs:
The third “net” — maintenance — is billed as CAM charges. For the full breakdown of the most common net structure, see our triple net (NNN) lease guide.
An absolute net lease takes triple net one step further: the tenant pays everything, including the roof, structure, and any capital repairs. The landlord’s return is truly hands-off, which is why these “bondable” leases are favored in single-tenant, credit-tenant net-lease investments. Base rent is the lowest of any structure.
Common in retail and shopping centers, a percentage lease charges a lower base rent plus a percentage of the tenant’s gross sales above a set breakpoint. It aligns the landlord’s return with the tenant’s success — the landlord shares in upside, the tenant gets relief on base rent.
In a ground lease, the tenant leases the land long-term (often 50–99 years) and builds or owns the improvements on it. At lease end, the building typically reverts to the landowner. Ground leases are used for long-term development where the owner wants to retain the land.
Key Takeaway: The lease type determines your real cost — not the headline rate. Always convert any quote to an estimated all-in cost per square foot before comparing one structure to another.
The right structure depends on your priorities, not on which number looks smallest in a listing:
Whatever the structure, the smart move is to compare the all-in cost and negotiate the expense terms. Our step-by-step guide on how to lease commercial property walks through the full process.
Across the Inland Empire and Coachella Valley, lease structures tend to follow the property type: industrial and retail trade predominantly on triple net terms, while multi-tenant office and flex space lean toward modified gross and full-service leases. Knowing which structure you’re really being offered — and what it will cost over the term — is where CCIM-level analysis pays off.
At Apex Real Estate Services, we model the full occupancy cost of any lease structure so owners and tenants see the real number, not just the headline rate.
This pillar anchors our commercial lease series. Each guide below covers one structure or cost component in depth:
How triple net leases work, who pays the three nets, and the pros and cons for tenants and landlords.
A side-by-side comparison of gross and net lease structures and how to convert any quote to an all-in cost.
How the landlord-tenant expense split works, what a base year is, and when modified gross makes sense.
What common area maintenance charges cover, how they are reconciled, and how tenants negotiate caps.
The step-by-step process for leasing commercial property, from search and touring to LOI, negotiation, and signing.
What are the main types of commercial leases?
The main types of commercial leases are the gross (full-service) lease, the modified gross lease, and net leases — single net, double net, and triple net (NNN) — plus absolute net, percentage, and ground leases. Each commercial lease type differs in who pays the property’s operating costs: property taxes, insurance, and maintenance.
Which commercial lease is most common?
The triple net (NNN) lease is the most common commercial lease, dominating retail and industrial property, while full-service and modified gross leases are most common in multi-tenant office buildings. Under a triple net lease the tenant pays property taxes, insurance, and maintenance on top of base rent, which is why single-tenant landlords favor the structure.
What is the difference between a gross and net lease?
In a gross lease the landlord pays operating costs out of one bundled rent; in a net lease the tenant pays those costs on top of a lower base rent. See our gross vs net lease comparison for the full breakdown.
Which lease type is best for a tenant?
The best commercial lease type for a tenant depends on the tenant’s priorities. Gross leases offer predictability; net leases offer a lower base rent with variable costs; modified gross splits the difference. Always compare the estimated all-in cost per square foot, not the headline rate.
What does NNN mean in a commercial lease?
NNN stands for the three “nets” in a triple net commercial lease: property taxes, building insurance, and maintenance (CAM charges). A tenant on an NNN lease pays those three operating costs on top of a lower base rent. NNN is the dominant lease structure for retail and industrial property, including single-tenant net-lease investments.
Can you negotiate the type of commercial lease?
Yes — the commercial lease type and its expense terms are negotiable. Tenants commonly negotiate base years, expense stops, caps on CAM charges, and exclusions from pass-through costs, or propose a modified gross alternative to a net lease. A commercial real estate broker models each structure’s all-in cost so the tenant negotiates from real numbers.
How do I know which commercial lease type I have?
Check the lease’s expense provisions, not its label. If the tenant reimburses property taxes, insurance, and common area maintenance, the lease functions as a triple net (NNN) lease regardless of its title. If the landlord pays operating costs from one bundled rent, it is a gross lease. A modified gross lease spells out a negotiated split, usually with a base year.
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.
Not sure which lease structure you’re really being offered? Get a CCIM-level read on the real cost.
