What Is a Triple Net Lease (NNN)?

Put Simply

In a triple net (NNN) lease, the tenant pays rent plus three additional expenses: property taxes, building insurance, and maintenance costs. The landlord receives a truly "net" check: just the rent, with no calls about leaky roofs, rising tax bills, or surprise repair costs. This is why NNN-leased properties are popular with investors who want passive, predictable income.

Typical NNN tenants include national retailers (fast food chains, dollar stores, pharmacies), industrial users, and medical operators. Because the landlord bears almost none of the operating risk, NNN properties tend to trade at lower cap rates; investors pay more per dollar of income for the stability and simplicity of a clean, net income stream.

The CCIM Perspective

The triple net lease structure defines the expense allocation between landlord and tenant, and that allocation is the defining investment characteristic, not just a legal detail. In a true NNN (or "absolute net") lease, the tenant is responsible for all operating expenses: real property taxes, building insurance, and all maintenance and repair including structural elements. The landlord's income stream is therefore net of all property-level costs: stable, predictable, and protected from operating expense inflation through built-in rent escalations.

The NNN spectrum has important nuances that cannot be glossed over. An absolute NNN lease transfers all risk to the tenant, including roof and structure. A standard NNN may carve out roof and structure for the landlord, particularly common in smaller single-tenant industrial deals. A modified gross or gross lease retains all expenses with the landlord. Mischaracterizing a lease as "NNN" without reading the actual lease document is a common and materially costly due diligence error.

Single-tenant NNN (STNL) cap rates are heavily influenced by: (1) Tenant credit quality, a corporate-guaranteed lease trades 100 to 200 basis points tighter than the same building under a franchisee guarantee; (2) Remaining lease term, a 20-year lease at market commands a premium over a 3-year lease facing near-term rollover risk; (3) Rent escalation structure, fixed step-ups vs. CPI vs. flat rent each carry different inflation protection profiles; and (4) Dark store risk, the reuse value of the physical asset and location if the tenant vacates. A national pharmacy on a high-traffic corner has substantially more secondary leasing optionality than a single-tenant outparcel in a tertiary market.

The investor who buys a 20-year NNN lease is simultaneously underwriting a bond (predictable income stream) and a real estate position (long-term residual value and rent reset at expiration). Both components must be analyzed independently. Strong bond-like income from a weak location with poor reuse potential is not the "safe" investment it appears to be; it is a bond with a real estate tail risk that materializes at lease expiration.