Two suites down the hall from each other can be quoted at $2.25 and $2.85 per square foot and cost the tenant almost exactly the same amount. The difference is the lease structure, which decides who pays for taxes, insurance, maintenance, utilities, and janitorial on top of base rent.
Listing sites present these as a single dropdown value. That one word carries most of the real cost. Here is what each structure means and how to compare them honestly.
Quick reference
| Structure | Tenant pays beyond base rent | Landlord retains |
|---|---|---|
| Triple Net (NNN) | Taxes, insurance, CAM | Structure, roof, capital items (usually) |
| Double Net (NN) | Taxes, insurance | Maintenance, roof, structure, common areas |
| Single Net (N) | Taxes | Insurance, maintenance, structure |
| Full Service (Gross) | Nothing in year one | Everything, subject to a base-year stop |
| Modified Gross | Negotiated subset, deal by deal | The remainder |
| Industrial Gross | Utilities, interior maintenance, often CAM increases | Taxes, insurance, roof, structure |
| Plus Utilities | Its own utilities | Taxes, insurance, CAM, janitorial |
| Plus Electric | Its own electricity | Everything else |
| Plus Tenant Electric | Electricity used inside its premises | Common-area power and everything else |
| Plus Cleaning | Its own janitorial | Utilities, taxes, insurance, CAM |
| Plus Electric and Cleaning | Electricity and janitorial | Taxes, insurance, other utilities, CAM |
| Plus Utilities and Cleaning | All utilities and janitorial | Taxes, insurance, structure, CAM |
| TBD | Not yet determined | Open for negotiation |
The net family
Net leases move operating costs from the landlord to the tenant. The number of "nets" tells you how many cost categories moved.
Single Net (N). Tenant pays base rent plus property taxes. The landlord keeps insurance and maintenance. Rare in practice, and usually a sign the deal was structured around one specific concern rather than a market convention.
Double Net (NN). Tenant pays base rent plus property taxes and building insurance. The landlord retains maintenance, typically roof, structure, and common areas. Common in single-tenant retail and some industrial.
Triple Net (NNN). Tenant pays base rent plus its pro-rata share of taxes, insurance, and CAM (common area maintenance). This produces the lowest headline rate and the highest cost variability. The tenant absorbs increases in all three categories.
The three nets are commonly quoted as an estimate, often called the NNN load, the CAM estimate, or additional rent. That estimate is reconciled against actual expenses after year end, and a true-up bill or credit follows. Ask for the last two years of reconciliations before you sign.
The gross family
Full Service (Gross). One rent number covers taxes, insurance, CAM, utilities, and janitorial. Standard in multi-tenant office. Almost always paired with a base-year expense stop: the landlord absorbs operating costs at the year-one level, and the tenant pays its share of increases above that baseline in later years. A full service lease is not a fixed-cost lease. It is a fixed-cost first year.
Modified Gross. The middle ground, and the least standardized term on the list. The landlord covers some expenses and the tenant covers others, negotiated deal by deal. The most common version has the landlord paying taxes and insurance while the tenant pays its own utilities and janitorial. Never assume the split. Read the expense allocation section.
Industrial Gross. The warehouse and industrial version of modified gross. The landlord typically pays taxes, insurance, and roof and structure. The tenant pays utilities, interior maintenance, and often CAM increases over a base year.
The "plus" family
These are gross leases with specific carve-outs, used where one expense category varies enormously by tenant.
Plus Utilities. Gross rent with the tenant paying its own utilities, either directly to the provider or by submeter.
Plus Electric. The same idea narrowed to electricity, which in office space is the swing cost because HVAC and lighting loads differ so widely between a law office and a server-heavy tenant.
Plus Tenant Electric. Functionally the same as Plus Electric. The tenant is billed for power consumed inside its own premises while the landlord keeps common-area electricity. If the space is not separately metered, find out how the landlord calculates the tenant's share.
Plus Cleaning. Gross rent plus tenant-paid janitorial. Common where a tenant wants its own vendor or has above-standard needs such as medical, dental, food service, or lab space.
Plus Electric and Cleaning. Tenant pays its own electricity and janitorial. Landlord covers taxes, insurance, structure, and other utilities such as water and gas.
Plus Utilities and Cleaning. Tenant pays all utilities and its own janitorial. Landlord retains taxes, insurance, structure, and CAM.
TBD. The structure has not been set. Common on new listings before the landlord decides on a strategy, and occasionally a signal that the landlord is flexible.
How to compare quoted rates
A headline rate is not a price. Convert every option to an effective cost per square foot per month, then multiply by the square footage.
Take a 3,000 square foot suite with three competing quotes:
| Quote A | Quote B | Quote C | |
|---|---|---|---|
| Structure | Triple Net | Full Service | Modified Gross |
| Base rate | $2.25 / SF | $2.85 / SF | $2.50 / SF |
| Estimated NNN | $0.65 / SF | included | included |
| Tenant electric | included in NNN | included | $0.18 / SF |
| Tenant janitorial | included in NNN | included | $0.12 / SF |
| Effective rate | $2.90 / SF | $2.85 / SF | $2.80 / SF |
| Monthly cost | $8,700 | $8,550 | $8,400 |
The cheapest headline rate is the most expensive deal, and the most expensive headline rate lands in the middle. That inversion is the whole reason the structure matters.
Four things this table does not yet capture, and each can move the answer:
- Escalations. A 3 percent annual bump on a gross lease compounds on the full number. On a net lease it usually compounds only on the base, while the NNN load moves with actual expenses.
- Base year and expense stops. Confirm which calendar or fiscal year is the base, and whether it is a full year of stabilized occupancy. A base year set during a partly vacant year understates the baseline and inflates your future pass-throughs.
- Gross-up provisions. In a building that is not full, a gross-up clause restates variable operating expenses as though the building were 95 to 100 percent occupied. This is standard and generally fair, but it changes the base year math, so confirm the gross-up applies to the base year as well as to comparison years.
- Rentable versus usable square feet. Rent is charged on rentable area, which includes a share of common areas. The load factor is typically 10 to 18 percent in office. Two buildings quoting the same rate on different load factors are not quoting the same price.
Also confirm the quoting period. San Diego commercial space is typically quoted per square foot per month. Much of the country quotes annually. A $30 rate and a $2.50 rate can be identical.
Questions to ask before you sign
On cost allocation
- Which specific expenses fall to the tenant, by category?
- What is the current NNN or CAM estimate, and what were the actual reconciled figures for the last two years?
- Are capital expenditures excluded from CAM, or amortized into it? If amortized, over what useful life?
- Is there a cap on controllable operating expense increases? Is it cumulative or non-cumulative?
- Are management fees included in CAM, and at what percentage?
On the base year, if the lease is gross
- What is the base year, and was the building stabilized during it?
- Does the gross-up provision apply to the base year?
- Are taxes reassessed on sale passed through? In California, a sale can trigger a Proposition 13 reassessment that materially raises the tax component. Ask for a Proposition 13 protection clause.
On the physical space
- Is the suite separately metered for electricity and gas?
- Who maintains and replaces HVAC, and is the tenant's obligation capped per occurrence or per year?
- Is the load factor disclosed, and how was rentable area measured?
On the total deal
- What tenant improvement allowance is offered, and who manages the work?
- How much free rent, and is it gross or base rent only?
- What are the annual escalations, and do they apply to base rent alone?
Red flags
A NNN estimate well below market for the building type usually means the estimate is stale, not that the building is cheap. Underquoted CAM shows up as a reconciliation bill in month fourteen.
An uncapped CAM in a building with deferred maintenance transfers the owner's capital plan onto the tenant. Ask what is scheduled in the next five years.
A modified gross lease that never defines the split is the single most common source of commercial lease disputes. If the allocation is not written out expense by expense, it is not agreed.
The practical takeaway
The same label means different things between landlords, and even between two buildings in the same portfolio. The expense allocation language in the lease controls, not the dropdown value on the listing. Treat the structure as a starting question, not an answer, and never compare quoted rates until you have grossed each one up to an effective cost per square foot.
If you are evaluating space in San Diego County and want the comparison run on your actual candidate list, AR Taylor Real Estate represents tenants on commercial leases, and in a tenant representation deal the landlord pays the fee.