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Understanding Your Lease Rate

In the Anchorage Leasing Market, there are two primary types of leases: “Full Service” and “Triple Net” or “NNN.” When going in to a leasing situation, it is very important to understand as accurately as possible how much you will be spending each month in order to make educated business decisions. Below, we will break out the two main types of leases and discuss another not-so-common lease type.

Full Service. Well, it’s pretty much just that: full service. This type of lease means that the Landlord is paying for all the buildings operating expenses to include the utilities. The amount you will owe the landlord each month is simply the lease rate (let’s use $2.00/sf/m) times your leased square footage (let’s use 1,000). In this scenario, you would pay your Landlord $2,000 per month with no other fees owed.

Triple Net or NNN. This type of lease can be slightly more complicated. Essentially, the Landlord in this scenario pays none of the operating expenses of the building or any utilities, or at least they are passed along to the tenant—you. The amount you owe the Landlord each monththe Base Rent plus the NNN fees (generally consisting of taxes, insurance, property management, and Common Area Maintenance or CAM) plus separately metered utilities. Let’s use $1.35/sf/m for the Base Rent and $0.35/sf/m for the NNN fees.Thus, in this scenario, you would pay the Landlord approximately $1.70/sf/m. So, for a 1,000 sf space, it would be $1,700 per month. Then, you are still responsible for paying the utilities to the utility company. It’s best to get historical averages of the space in order to make better leasing decisions. You can call the utility company to get this data.

Modified Gross Lease. This type of lease is a combination, generally, of the above two lease variations. In the Modified Gross Lease, most Landlords don’t pass any NNN fees to the Tenant but require them to pay for their own utilities. Thus, in this scenario, you would pay your Landlord the base rent and take care of the utilities. A good review of your lease will help understand your actual overhead.

Here at Marc Dunne Commercial Real Estate, when we represent Tenants, we ensure our clients get the best protection and care by providing in-depth explanations of the Lease Agreement. Call me for any lease questions you have at (907) 273-7310.