Gross Lease vs. Triple Net (NNN)
Gross lease vs triple net NNN explained — who pays operating expenses determines landlord NOI, which is why face rents are not comparable across lease types.
By Michael Laudino, LFO Capital LLC · Published 2026-06-17
Under a gross lease the landlord pays the operating expenses out of the rent; under a triple net (NNN) lease the tenant reimburses those expenses on top of the rent. The face rent can be identical and the landlord's NOI still differs by the full operating-expense load — which is exactly why you can't compare face rents across lease types.
Operating expenses on industrial space — property taxes, insurance, common-area maintenance — are real money, often $2.00 to $3.00 per square foot. The lease decides who carries them. In a gross structure that cost sits with the landlord and comes straight out of the quoted rent, so the NOI the landlord actually banks is the face rent minus opex.
A true NNN lease shifts taxes, insurance, and maintenance to the tenant, who pays them in addition to base rent. The landlord's NOI converges toward the full face rent because the expense leakage is gone. Two otherwise-identical buildings quoting the same $7.00/sf will produce materially different net income depending solely on this allocation.
The discipline is to net every deal down to landlord NOI before comparing. A broker who quotes a gross face rent against an NNN face rent and calls them equivalent is comparing two different things. When you build a warehouse pro forma, the lease structure is the first thing you resolve, not the last. See more on how lease economics flow through asset returns in our industrial hub.
Worked example — 100,000 sf warehouse
| Line | Amount |
|---|---|
| Building size | 100,000 sf |
| Face rent ($7.00/sf — same either way) | $700,000 |
| Gross lease — landlord pays ~$2.50/sf opex | −$250,000 |
| Gross lease — landlord NOI | $450,000 |
| NNN — tenant reimburses opex → landlord NOI | $700,000 |
The discipline: same $7.00/sf face rent, roughly $250,000 of different NOI — never compare face rents across lease types without netting opex down to landlord income first.
Frequently asked questions
Why can't I compare face rents between a gross lease and an NNN lease?
Because they include different things. Under a gross lease the landlord pays operating expenses out of that face rent; under NNN the tenant reimburses those expenses on top of the rent. The same $7.00/sf face rent produces very different landlord NOI depending on who carries the opex, so face rent alone tells you nothing until you know the lease structure.
Does NNN mean the landlord has no expenses at all?
Not quite. Under a true triple net lease the tenant covers taxes, insurance, and maintenance, but the landlord may still carry structural/roof obligations, management, and any vacancy costs depending on the lease. Read the lease — 'NNN' is used loosely, and the actual expense allocation is what drives net income.
Which lease type produces higher landlord NOI?
NNN, holding face rent constant, because the tenant reimburses operating expenses rather than the landlord absorbing them. But that does not make NNN automatically the better deal — gross-lease face rents are typically quoted higher to compensate, so you have to net both down to landlord NOI to compare them honestly.
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