Commercial tenants in Texas often see two common lease structures: NNN leases and gross leases. Understanding the difference is critical because the base rent does not always tell you what you will actually pay each month.
A cheaper base rent can be misleading if the NNN expenses are high. A higher gross rent can be attractive if it includes most operating costs and creates budget certainty.
What is a NNN lease?
NNN stands for triple net. In a NNN lease, the tenant typically pays base rent plus its share of property taxes, property insurance, and common area maintenance. These expenses are often called operating expenses or pass-throughs.
Common area maintenance may include landscaping, parking lot maintenance, exterior lighting, trash, security, management fees, repairs, and other property-level costs.
A NNN lease is common in retail, medical office, industrial, and some office properties.
What is a gross lease?
In a gross lease, the tenant pays one rental amount that includes some or all property expenses. Office leases are often structured as full-service gross, modified gross, or base-year leases. Smaller office suites and some flex arrangements may also be quoted as gross.
Gross leases can be easier to budget, but tenants should still confirm what is included. Utilities, janitorial, internet, parking, and after-hours HVAC may or may not be part of the rent.
Modified gross and full-service gross
A modified gross lease sits between NNN and full-service gross. The landlord and tenant divide expenses based on the lease. For example, rent may include property taxes and insurance, but the tenant pays utilities and janitorial.
A full-service gross lease usually includes base rent, operating expenses, utilities, and janitorial, but details vary. Parking and after-hours HVAC may still be separate.
Why total occupancy cost matters
Tenants should compare the total monthly cost, not just the advertised rate. For a NNN lease, calculate:
Base rent + NNN expenses + utilities + insurance + maintenance obligations + parking + other recurring costs.
For a gross lease, confirm what is included and what is excluded. The goal is to compare apples to apples.
Texas-specific issue: sales tax on commercial rent
Texas generally imposes sales tax on the rental of commercial real property unless an exemption applies. Tenants should understand whether tax applies to their lease and how it affects monthly occupancy cost. This is another reason to compare full cost rather than base rent alone.
Questions tenants should ask
Before signing a commercial lease, tenants should ask:
- Is the lease NNN, gross, modified gross, or full-service?
- What expenses are included?
- What expenses are excluded?
- Can the landlord provide current operating expense estimates?
- Are expenses reconciled annually?
- Are there caps on controllable expenses?
- Are management fees included?
- Are capital repairs passed through?
- Is parking included?
- Are utilities separately metered?
Final thought
NNN and gross leases can both be fair structures. The issue is not which one is better in the abstract. The issue is whether the tenant understands the real monthly cost, the risk of future increases, and the obligations hidden in the lease language.
Unsure what a lease structure will really cost you over the term? Our tenant representation practice models NNN, gross, and everything between on your actual numbers before you commit.
Schedule a free consultation — we respond within one business day. Tenants can also start with our space-requirement form.
Source notes
- Texas Comptroller – Commercial Leases Tax: https://comptroller.texas.gov/taxes/publications/96-259.php
Market note: commercial real estate data changes quickly. These articles were prepared as evergreen SEO drafts using publicly available 2026 market reports and should be lightly refreshed before publishing if conditions materially change.
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