What Is a Triple Net Lease? A Clear Breakdown (With an Example)

Commercial lease structures play a bigger role in financial planning than many teams realize. And while base rent might seem like the headline number, it’s often only part of the story.

One of the most misunderstood lease types is the triple net lease (NNN). Here’s a straightforward breakdown of what it means, how it works, and how your team can manage it more effectively.

Understanding the Triple Net Lease

A triple net lease is a type of commercial lease in which the tenant agrees to pay three primary operating expenses in addition to the base rent:

• Property taxes
• Insurance premiums
• Maintenance and common area expenses (CAM)

This arrangement is designed to provide landlords with a predictable income stream by transferring the variability of these costs to the tenant. However, it introduces complexity for tenants that requires careful budgeting and ongoing oversight.

A triple net lease may appear straightforward, but the occupancy cost often extends far beyond the base rent. Accurate forecasting becomes critical when tenants are responsible for variable expenses like property taxes, insurance, and maintenance. For real estate managers, using a system that leverages historical data—such as past utility bills, seasonal CAM charges, and building-specific trends—can provide valuable insight into future operating costs and help prevent budget overruns.

Why This Structure Exists

From the landlord’s perspective, triple net leases are attractive because they reduce operational risk. Rather than absorbing fluctuating expenses themselves, they pass them through to tenants.

Tenants may benefit from lower base rents or more direct control over property expenses. However, they can easily underestimate their financial obligations without proper tracking, especially in multi-property portfolios or long-term lease agreements.

Real-World Example: Retail Scenario

Consider a scenario where your company leases 10,000 square feet of retail space annually at $25 per square foot, with the lease structured as NNN.

• Base rent: $25 x 10,000 sq ft = $250,000/year
• Property taxes: $35,000
• Insurance: $12,000
• Maintenance & CAM fees: $18,000

Total actual cost: $315,000 per year

That’s a 26% increase over the base rent alone—costs that can have significant implications for financial reporting, forecasting, and approval processes.

Tools to Project Triple Net Costs More Accurately

Triple net leases require proactive expense tracking and forecasting. Fortunately, there are several resources real estate and finance teams can use to improve visibility and reduce surprises:

Historical Operating Expense Statements

Request 3–5 years of CAM reconciliations or landlord expense statements during lease negotiations. These documents provide insights into recurring charges and seasonal expense patterns.

Internal Utility + OPEX Data

Pull historical utility bills, maintenance invoices, and insurance payments from your accounting systems. Use this data to benchmark expected costs across similar buildings or lease types.

Lease Tracking Tools (like Spacebase)

With Spacebase, teams can:

• Tag and track pass-through charges by lease
• Run reports by region, landlord, or asset class
• Spot trends in utilities and operating costs using historical data

This visibility helps you budget more accurately and negotiate with better context.

BOMA Benchmarks

The Building Owners and Managers Association (BOMA) publishes annual benchmarks for operating expenses across asset types and markets. These serve as a helpful baseline when reviewing landlord estimates.
Visit: https://www.boma.org

Property Management Reports

If your organization owns or subleases space, check with your property managers for projected expenses tied to vendor contracts, planned repairs, or capital reserve requirements. These can all affect your total occupancy cost.

How Spacebase Helps Simplify Complex Lease Structures

At Spacebase, we designed our software with this complexity in mind. Our platform allows finance and real estate teams to:

• Accurately track pass-through costs across every lease
• Receive notifications for variable expenses like CAM reconciliations
• Generate custom journal entries mapped directly to your ERP
• Maintain alignment across departments—without relying on spreadsheets or inbox searches

When triple net leases are managed in isolation, visibility can be lost. With Spacebase, lease data is centralized, searchable, and actionable, so your team always understands the financial picture.

Final Thought

Triple net leases are standard in commercial real estate but require more than a glance. Understanding the full cost of your lease obligations and having a system to manage them is essential for accurate reporting, smarter negotiations, and confident decision-making.

Want to see how Spacebase can support your lease accounting strategy?
👉 Book a demo

Brooke Colglazier

Marketing Manager