Triple Net (NNN) Cost Per Square Foot: The Complete Commercial Lease Guide

When browsing commercial properties on commercial real estate portals, listing rates are frequently presented as:

$24.00 / SF / YR (NNN) with NNN estimated at $6.50 / SF / YR.

If a business owner assumes their annual lease cost is simply $24.00 per square foot, they will experience a severe budget shortfall when the landlord invoices for the additional $6.50 / SF in operating expenses.

Breakdown of the 3 Nets (NNN)

In a Triple Net commercial structure, the tenant pays base rent to the landlord while reimbursing their pro-rata share of operating costs:

1. Net 1 - Real Estate Property Taxes: Local municipal tax assessments levied on the commercial building and parcel.
2. Net 2 - Property & Hazard Insurance: Landlord’s building insurance coverage, flood insurance, and general liability policies.
3. Net 3 - Common Area Maintenance (CAM): Expenses incurred to operate, repair, and maintain shared building elements (parking lot paving, snow removal, exterior lighting, landscaping, roof maintenance, janitorial, and property management fees).

Total Occupancy Cost Per Sq Ft = Base Rent + Property Taxes + Insurance + CAM

Step-by-Step Calculation Example

Suppose you are signing a commercial lease for a 3,000 RSF retail location:

• Base Rent: $25.00 per sq ft / year
• Property Taxes (N1): $3.00 per sq ft / year
• Insurance (N2): $1.00 per sq ft / year
• CAM Expenses (N3): $4.00 per sq ft / year
• Total NNN Rate: $3.00 + $1.00 + $4.00 = $8.00 per sq ft / year
• Total Effective Rate: $25.00 + $8.00 = $33.00 per sq ft / year

Monthly Payment Breakdown

• Annual Total Occupancy Cost: 3,000 sq ft × $33.00 = $99,000 / year
• Monthly Lease Payment: $99,000 ÷ 12 = $8,250 / month

Lease Structures Comparison Table

Calculate commercial rents and NNN expense breakdowns with our commercial calculator tools: