I’m looking into renting a commercial space in a local office building in town but before I call up the lease agent want to understand some of the basics so I can understand if I can afford it. What’s baffling me is that some listings are “Net Net” (NN) and others are “Net Net Net”. What the heck do those mean?
Real estate is already complicated enough without more jargon, but the sad reality is that commercial real estate leases are super complicated because there are a lot of different factors involved.
The easy part is the number of square feet that the space contains and the monthly cost for that square footage. Where it gets complicated is when you start to factor in taxes and utilities, and that’s where we get to “net net” and what many people call “triple net”.
For example, I’ve been looking at a local space for my office that’s listed as costing:
What this means is that there are a number of spaces available in this building, ranging from 829 square feet (I’ll abbreviate this “sf” for simplicity) to 2348sf.
The lease on the space ranges from $22 to $25 per square foot, presumably depending on location, windows, and the desirability of the overall space. That’s also on an annualized basis, which also means that it’s for an annual lease. Do the math and the smallest space is going to cost (829*22)/12 = $1519/month.
But wait, we’re not done, because of the “net lease” effect. In addition to the rent itself, there are other costs associated with the operation of the space, costs that can include property taxes, insurance, repairs, utilities, and maintenance. These are often referred to as “net”, “double net” and “triple net” (or, yes, Net Net or Net Net Net, or NN and NNN).
According to my Google research, the key difference is that a triple net lease means that there’s no landlord responsibilities. Double net leases, by contrast, require the landlord to take responsibility for some aspect of the property, typically roof, structure or parking lot.
I’m not a commercial real estate expert, but my impression is that whether they say it’s one or the other of these, it’s just a cost that’ll be slapped on to the price, so $22 is really $22 + $6.98 or $28.98 in our example listing.
Do the math again and that means that the “total” cost of the smallest office space in this instance is (829*28.98)/12 = $2,002 per month. You can then recalculate that to be $2.41sf/month.
I hope that’s helpful. My take after having done the research and gotten thoroughly confused as I went along is to ask lots of questions about costs before you sign anything and consider having a lawyer review your lease too.