Modified gross vs NNN lease.
Compare two commercial lease structures with the same space size. The cheapest-looking lease can become more expensive once pass-through charges and risk are included.
Simple rule: gross leases hide less variable risk. NNN leases can look cheaper until taxes, insurance, CAM, and maintenance are added.
Modified gross estimate
—Monthly occupancy estimate.
NNN estimate
—Monthly occupancy estimate.
Which is safer?
Neither structure is automatically better. The safer lease is the one where exclusions, repairs, reconciliations, increases, and tenant obligations are written clearly.
- Ask what the landlord can pass through to tenants.
- Ask for historic NNN/CAM reconciliations.
- Ask who pays for roof, HVAC, structural repairs, code work, and parking.
- Ask whether charges are capped or can rise freely.