If you've looked at retail or single-tenant deals, you've seen "NNN" everywhere. Triple net leases are one of the most common — and most misunderstood — lease structures in commercial real estate.
Here's what NNN actually means and why it matters for your investment analysis.
What Does NNN Mean?
NNN stands for "triple net" — the tenant pays three categories of expenses on top of base rent:
- Property taxes
- Insurance
- Common area maintenance (CAM)
In a true NNN lease, the landlord receives rent and passes through virtually all operating expenses to the tenant.
Landlord Receives: Base Rent
Tenant Pays: Base Rent + Taxes + Insurance + CAM
The "net" refers to what's net to the landlord. Triple net = three categories of expenses passed through = more predictable landlord income.
NNN vs. Other Lease Types
Understanding the spectrum of lease structures helps you evaluate risk and returns.
| Lease Type | Tenant Pays | Landlord Pays | |------------|-------------|---------------| | Gross | Base rent only | All operating expenses | | Modified Gross | Base rent + some expenses | Remaining expenses | | Single Net (N) | Base rent + property taxes | Insurance + CAM | | Double Net (NN) | Base rent + taxes + insurance | CAM | | Triple Net (NNN) | Base rent + taxes + insurance + CAM | Structural only (usually) | | Absolute NNN | Everything including roof/structure | Nothing |
Why Investors Love NNN Leases
Triple net properties are popular with investors for several reasons:
Predictable cash flow — No surprise expense bills. Your NOI is essentially locked in.
Passive management — Tenant handles day-to-day property maintenance.
Creditworthy tenants — NNN deals often feature national tenants (Walgreens, Starbucks, Dollar General).
Simple underwriting — Fewer variables to model when expenses are passed through.
NNN properties often trade at lower cap rates (higher prices) because of their lower risk profile. You're paying a premium for predictability.
The Fine Print: What to Watch For
Not all NNN leases are created equal. Key items to verify:
Roof and structure responsibility — True NNN passes these to the tenant. Some leases carve out landlord responsibility for structural repairs.
CAM caps — Some leases cap annual CAM increases, leaving the landlord exposed if costs spike.
Lease term remaining — A 15-year NNN lease to Walgreens is very different from a 2-year NNN lease to a local tenant.
Rent bumps — Fixed increases (2% annual) vs. flat rent affects your long-term returns significantly.
Analyzing NNN Deals
When evaluating NNN properties, focus on:
- Tenant credit quality — Investment-grade tenants reduce default risk
- Lease term — Longer term = more security (but less upside)
- Rent per SF vs. market — Is the tenant paying above or below market?
- Location fundamentals — Would another tenant want this space?
- Cap rate relative to risk — Don't overpay for "safe" cash flow
How Listserved Handles Lease Types
When you forward broker emails to Listserved, our AI extracts lease structure information automatically. You'll see whether a deal is NNN, gross, or modified gross right on your dashboard.
No more digging through OMs to figure out what's included in the NOI.
Ready to streamline your deal analysis? Get started free and see lease types extracted automatically.