NNN Lease (Triple Net Lease)
A triple net (NNN) lease requires the tenant to pay property taxes, insurance, and maintenance directly, on top of base rent — the three 'nets.' Because the tenant bears nearly all operating costs, the landlord's net operating income sits close to gross rent collected, and NNN properties typically carry lower operating expense ratios than gross-leased buildings.
NNN leases are common on single-tenant retail, industrial, and net-leased office, especially with credit tenants on long lease terms. Lenders underwriting these deals focus heavily on tenant credit and remaining lease term, since NOI is essentially the rent stream itself with minimal operating variability.
The tradeoff is concentration risk: if the single tenant vacates or defaults, NOI can fall to near zero rather than declining gradually as in a multi-tenant building. Lenders typically require remaining lease term relative to loan term to guard against this.