What is the difference between Triple Net, Full Service, Gross and Modified Gross commercial lease rate terms? Even some of the professionals get confused!
Very often the MacRo inbox will receive an email or one of our associates will get a telephone inquiry that goes something like this:
Good Morning!
My partner and I are looking for roughly 1,200 square feet of office space more or less, depending on the lease rate within or on the outskirts of the City of Frederick.
Our minimum square footage requirement, although tight, would be about 800 SF.
Right now we are in about 600 SF and paying around $1,061 per month plus electricity for our unit, but we are willing to pay more depending on the specifics of the new space.
In my search on the web, I have seen several lease rates quoted, but I am a bit confused by the different acronyms and phrases after the price. What does it mean when I see NNN, FS, Full Service, Net, MG, Gross lease, Pass-Throughs and OPEX?
Thank you in advance for your help,
Anne
The first thing in our response that is important to do is make sure that we are speaking the same language with the prospect. Typically with a party who is currently leasing commercial space, we try to help them define the kind of lease rate they are currently committed to.
In Anne’s case, we found upon further inquiry that she and her partner are located in an older small office building downtown with about 5 other tenants. This is the first space that they have ever leased, and they have been in the space for almost 3 years.
The landlord does not charge them anything other than a single rental charge that has been escalating at 3% on the lease anniversary date. And, as Anne stated, the unit is separately metered for electricity. Therefore, within the rental payment, the landlord has taken the responsibility to pay Anne’s share of the water and sewer bills, the gas bill for the central heat in the building, as well as all costs that relate to the maintenance of the building, the real estate taxes, insurance, etc. (often referred to as Operating Expenses or OPEX).
The type of lease that she and her partner are currently committed to is known as a Gross Lease.