Lease Rates – What’s Important to You?

In my previous blog post I mentioned that understanding the two most common lease rate structures – NNN vs Full Service – are important to understand.  Please consider the following: 

Triple Net (NNN) –  Consider NNN lease rate structures like you would a home mortgage.  By that I mean you may have a mortgage payment every month but that isn’t the only cost you pay to maintain your home is it?  There are property taxes, insurance costs, utility costs, maintenance costs etc.  The real cost of your home is certainly  more than just the mortgage payment — so are Triple Net (NNN) lease rates.  To make a fair comparison between Full Service rates vs NNN rates, add the “extra” costs to the NNN lease rate.  These additional NNN cost for the Northwest Valley range anywhere from $6.00 – $9.00 per square foot, so for purposes of example: 

Triple Net (NNN) lease rate of $15.00 per square foot on 1,000 square feet = $1,250.00/month 

ADD additional net costs – utilities, CAM (maintenance), taxes, insurance etc of at least $6.00 square foot = $500.00/month 

TOTAL ESTIMATED NNN LEASE PAYMENT = $1,750.00/month (conservatively) 

ACTUAL COST PER SQUARE FOOT = $21.00 

Given that Full Service Lease Rates include all of your costs in one payment/cost per square foot,  A $19.00 or $20.00 per square foot Full Service Lease Rate is economically a better a deal for your business.

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Triple Net (NNN) vs Full Service Lease Rates

If you have ever leased commercial office space or if you are currently seeking commercial office space to lease, you have no doubt encountered the two most common lease rate calculations of Triple Net (NNN) and Full Service.  The differences can seem subtle but they make a big difference in the actual cost of your office space.

Consider that a Full Service lease rate will include ALL of the expenses in one convenient lease payment while the NNN lease will only included the rent.  It can be quite costly to pay for CAM (Common Area Maintenance) charges, direct utility costs, taxes & insurance costs ON TOP of the lease rate.  Don’t forget to add these costs to a NNN rate – a $15.00/square foot  NNN rate can be a total of $21.00 – $24.00 per square foot in reality.

In my next blog I will give some typical examples of NNN (Triple Net) lease rates and why you need to consider the financial impact to your business before making a decision.