Commercial Real Estate Lease Types Explained

Commercial real estate lease types determine who pays for what expenses between a landlord and tenant. That allocation of expense risk shapes net effective rent, underwriting assumptions, and how investors compare cap rates across assets. For institutional investors, lenders, brokers, and asset managers, the difference between a gross lease and a net lease matters. It changes how analysts model NOI, compare cap rates across assets, and read a rent roll.

This guide covers the full spectrum of commercial real estate lease types: full service gross, modified gross, single net, double net, triple net (NNN), and percentage leases. It also covers how each structure shows up in lease comp data.

Key Takeaway: Commercial real estate lease types split into two families. Gross leases put operating expense risk on the landlord; net leases shift some or all of it to the tenant. NNN leases, common in single-tenant industrial and net-lease retail, push taxes, insurance, and maintenance entirely to the tenant. Full service gross leases, standard in multi-tenant office, bundle everything into one rent number.

What Are the Main Commercial Real Estate Lease Types?

The main commercial real estate lease types are gross leases, modified gross leases, net leases (single, double, and triple net), and percentage leases. Each defines a different split of operating expense responsibility between landlord and tenant. The choice of structure varies by asset type, tenant size, and market convention.

At a high level:

• Gross lease / full service gross lease: landlord pays taxes, insurance, and maintenance out of one flat rent.
• Modified gross lease: landlord and tenant split operating expenses by negotiated terms.
• Net lease (N, NN, NNN): tenant pays base rent plus one, two, or all three operating expense categories.
• Percentage lease: tenant pays base rent plus a share of gross sales, used almost exclusively in retail.

Office buildings default to gross or modified gross structures because shared HVAC, elevators, and common areas make itemized tenant billing impractical. Industrial and net-lease retail default to triple net because single-tenant buildings make direct expense pass-through straightforward.

Gross Lease vs. Net Lease: What’s the Difference?

A gross lease has the tenant pay one number, and the landlord absorbs taxes, insurance, and maintenance out of that rent. A net lease has the tenant pay base rent plus some or all of those costs separately, so headline rent looks lower even though total occupancy cost may be similar.

The practical difference shows up in underwriting. Gross lease rent rolls require the landlord to forecast operating expense growth against a fixed rent. Net lease rent rolls transfer that risk to the tenant, which is why net lease assets often trade at tighter cap rates: NOI is more insulated from expense inflation. Investors evaluating net lease portfolios frequently benchmark hold periods and yield against NCREIF index data for comparable net-lease property types.

What Is a Full Service Gross Lease?

A full service gross lease bundles rent, taxes, insurance, utilities, and maintenance into a single payment, usually anchored to a base-year expense stop above which the tenant reimburses increases. It’s the standard structure for multi-tenant Class A and Class B office space.

CompStak’s office data shows why the base-year mechanic matters. Concession ratios, though still elevated versus historical norms, declined over the past two quarters for both Prime Class A and non-Prime Class A space, per CompStak’s 2025 Biannual Office Market Report — Part Four. Landlords structuring full service gross leases are pricing expense stops and Work Value (CompStak’s field name for tenant improvement allowance) against that easing concession environment.

What Is a Modified Gross Lease?

A modified gross lease divides operating expenses between landlord and tenant by negotiation rather than a fixed formula. A common version has the tenant cover utilities and janitorial while the landlord retains taxes, insurance, and structural repairs.

Modified gross sits between full service gross and net leases on the risk-allocation spectrum. It shows up frequently in mid-size office and flex space, where tenants want some cost transparency without taking on full net lease responsibilities. Because the expense split is negotiated deal by deal, comparing modified gross rents across a market requires normalizing for exactly which expenses each tenant carries. That’s one reason lease comps need to record expense structure alongside rent, not just the headline $/SF figure.

What Is a Single Net Lease?

A single net lease (N) requires the tenant to pay base rent plus property taxes, while the landlord still covers building insurance and maintenance. It’s the lightest form of net lease and less common than double or triple net structures in institutional-grade assets.

Single net leases appear more often in smaller, owner-user-adjacent deals where the tenant wants some cost exposure without the full triple net package. Because they’re less standardized, single net deals require closer scrutiny of the actual lease language. Two “single net” leases in the same building can carry meaningfully different tenant obligations depending on how taxes are calculated and escalated.

What Is a Double Net Lease?

A double net lease (NN) adds building insurance to the tenant’s obligations on top of property taxes, leaving only maintenance and structural repairs with the landlord. It’s a middle-ground structure, more common in strip retail and small industrial than in trophy assets.

Double net leases still leave the landlord holding maintenance risk, which matters for older buildings where roof, HVAC, and structural repairs can be unpredictable. Investors underwriting NN assets should model a maintenance reserve explicitly rather than assume the rent roll fully insulates NOI.

What Is a Triple Net Lease (NNN)?

A triple net lease (NNN) puts all three major operating expense categories on the tenant: property taxes, insurance, and maintenance, including common area and structural upkeep in many single-tenant deals. It’s the dominant structure for single-tenant industrial buildings and net-lease retail, where the landlord’s role narrows to owning real estate and collecting rent.

Single-tenant net lease (STNL) industrial assets, which are typically triple net, carry a measurable rent premium over multi-tenant industrial space. That premium held above 5% for four straight quarters, reaching 5.6% in Q1 2026, with STNL starting rent at $11.46/SF versus $10.85/SF for non-STNL space, per CompStak’s 2026 Biannual Industrial Market Overview — Part Three. Since Q1 2019, STNL rents have grown 93.3% compared with 76.1% for non-STNL industrial. That gap reflects both the credit quality typical of single-tenant occupiers and investor demand for the lower management burden a triple net structure delivers.

For institutional investors, NNN assets function closer to a bond than a traditional equity real estate position. NOI stays largely insulated from expense volatility, which is part of why cap rate compression in net lease industrial has tracked closely with broader fixed-income yield movements.

Source: CompStak’s 2026 Biannual Industrial Market Overview — Part Three. Data as of Q1 2026.

What Is a Percentage Lease?

A percentage lease has the tenant pay a base rent plus a percentage of gross sales above a negotiated breakpoint. It appears almost exclusively in retail. The structure aligns landlord income with tenant sales performance, which matters most in malls and shopping centers where an anchor tenant’s foot traffic drives revenue for smaller in-line tenants too.

Percentage rent clauses require careful lease abstraction because breakpoints, exclusions from gross sales, and reporting cadence vary significantly by deal. A retail lease comp that only records base rent misses the percentage rent component entirely, understating the tenant’s true occupancy cost and the landlord’s true income potential.

How CompStak Tracks Lease Structure in Comp Data

CompStak captures lease type as a core field on every comp collected through CompStak Exchange, alongside starting rent, in-place rent, free rent, and Work Value. That structure lets analysts filter and compare rents by lease type, not just by headline $/SF. It matters because a net lease rent and a full service gross rent aren’t directly comparable without adjusting for expense responsibility.

Every comp submitted to CompStak Exchange runs through a multi-step verification process, including machine learning anomaly detection and review by CompStak’s data analyst team, before it becomes part of the dataset used across CompStak One, Rent Predictor, and AI Market Summary. That review matters most for lease type specifically, since expense allocation is one of the fields most often reported inconsistently by brokers working from memory rather than the executed lease.

FAQ: Commercial Real Estate Lease Types