Triple Net Lease Explained for a Manhattan Office Tenant

The three nets, one at a time

• Property taxes. Your proportionate share of the real estate tax bill on the building. Nobody at the property controls it, and a reassessment or a sale can move it sharply in a single year.
• Building insurance. Your share of the premium on the owner's policy for the property. It is separate from the insurance your own company carries.
• Maintenance. Your share of what it costs to operate and repair the property. This net has the loosest edges, because its definition decides whether capital projects get swept in.

Your share is normally your rentable area as a percentage of the whole building's, so on any net quote the first thing to verify is how that percentage was worked out.

Why Manhattan offices are quoted gross, with a base year

Triple net fits a property where one tenant, or a few, can carry the running costs directly: a store, a warehouse, an entire building. A floor in a multi-tenant office building is a different product. The landlord runs the building for everyone, and the Manhattan convention is a single rent with taxes, insurance and running costs already inside it, pegged to a base year, which is normally year one of the lease.

NNN still turns up at the edges of the Manhattan market: retail space at the foot of an office building, industrial and flex property, and the occasional lease of an entire building.

How to hold an NNN quote against a gross asking rent

Add the nets back before judging. The method has three steps:

• Ask the landlord for the current budget for each net, per square foot per year.
• Add those figures to the net base rent. The total is the all-in cost.
• Check what the gross quote covers, especially where its base year sits and how electricity is billed, then compare the two totals over the full term.

As a worked example, say a net quote reads $48 and the landlord budgets the three nets at $17 in total: the all-in figure is $65, and that is the number to set beside a gross asking rent. The live block on this page shows floors asking $50 to under $75 gross, the band the example lands in. The triple net entry covers what to negotiate if you do sign net.

What a Manhattan office tenant pays in place of the nets

The office equivalent is a share of increases. In the base year you pay the quoted rent and nothing extra for taxes or operating costs. In later years, if the building's costs climb above the base-year level, your proportionate share of the rise is billed as additional rent. You carry the growth, not the whole bill.

The discipline is the same as on a net lease: know which costs the quoted number leaves out. A base year set while the building was half empty, or over a partial first year, understates normal costs and makes every later year look like an increase. Operating expenses explains the base year and the audit right that keeps the statements honest.