If you’ve spent any time looking at commercial space in Los Angeles, you’ve encountered NNN leases. If you didn’t know what you were looking at, the advertised rate probably seemed reasonable right up until the full monthly number came into focus. Triple net leases are the dominant structure in LA’s retail and single-tenant commercial market, and understanding how they work before you sign is the difference between a space that fits your budget and one that quietly doesn’t.
What Is a Triple Net Lease?
How the Structure Works
A triple net lease (written as NNN) is a commercial lease structure in which the tenant pays base rent plus a share of the property’s operating expenses. Those expenses are divided into three categories, which is where the “triple” comes from: property taxes, building insurance, and common area maintenance (CAM). In a standard NNN lease, all three pass directly to the tenant, either as a fixed monthly addition or as variable costs reconciled annually.
Why the Advertised Rate Isn’t the Full Picture
The advertised lease rate in an NNN listing reflects only the base rent. The actual monthly cost is higher, often significantly so depending on the property, its age, and its location. That gap between the listed rate and the true occupancy cost is the source of most of the confusion and most of the surprises that tenants encounter with NNN leases in Los Angeles.
The Three Nets, Defined
Property Taxes
Property taxes are the tenant’s proportionate share of the annual property tax bill. In California, commercial properties are reassessed at sale, which means a building that recently traded hands may carry a substantially higher tax burden than one that hasn’t changed ownership in a decade. In West Hollywood and across the Westside, property tax contributions for retail and office tenants commonly run $0.80 to $1.20 per square foot per month, though that number can climb higher on recently sold or high-value properties.
Insurance
Insurance covers the landlord’s building insurance policy, not your business or contents, which you’ll need to carry separately. This is typically the smallest of the three nets, running $0.10 to $0.25 per square foot per month in most LA submarkets.
Common Area Maintenance (CAM)
Common area maintenance is the most variable of the three and the one most worth scrutinizing. CAM covers the landlord’s costs to maintain shared spaces and building systems: parking lots, landscaping, HVAC, roofing, lobbies, and exterior lighting, depending on the property type. In well-maintained Westside retail centers, CAM charges often land between $0.75 and $1.50 per square foot per month. In older properties or those with deferred maintenance, they can run higher, and year-end reconciliations can produce unexpected invoices if actual expenses exceeded estimates.
How NNN Compares to Gross and Modified Gross Leases
Gross Leases
In a gross lease, the tenant pays a single flat rate and the landlord covers all operating expenses out of that rent. The monthly cost is predictable, but the base rate is set higher to account for the landlord’s exposure to tax, insurance, and maintenance costs. Gross leases are more common in multi-tenant office buildings and certain industrial properties.
Modified Gross Leases
A modified gross lease sits between the two: the tenant pays base rent plus some expenses but not all. Utilities are commonly the tenant’s responsibility under a modified gross structure, while the landlord retains the property tax and insurance obligations. The specific split varies by property and is always spelled out in the lease.
Putting It in Dollar Terms
A Westside retail space advertised at $4.00 per square foot NNN might carry an additional $1.75 to $2.75 per square foot in combined nets, bringing the true occupancy cost to $5.75 to $6.75 per square foot. A comparable space offered under a gross lease in the same neighborhood would likely be listed at $6.00 to $7.00 per square foot, covering those same costs but built into the rate. Neither structure is inherently better; the question is which one gives you more cost certainty and how well you can evaluate the NNN components on a given property. That’s a calculation worth running against any space you’re seriously considering, including any of the commercial properties currently available across Los Angeles.
What to Watch Before You Sign
Hidden costs in NNN leases are rarely hidden by design. They’re missed because tenants don’t know what to ask for or how to read what they’re given.
CAM Caps
Many well-negotiated NNN leases include an annual cap on CAM increases, typically 3 to 5 percent per year. Without a cap, a major repair or property improvement can be passed through to tenants in full. Always ask whether a cap exists and what it covers.
Exclusions from CAM
Management fees, capital expenditures, and landlord administrative costs are sometimes bundled into CAM. Negotiating clear exclusions protects you from expenses that have nothing to do with maintaining the space you’re leasing.
Reconciliation Terms
Most NNN leases estimate monthly operating costs and reconcile them against actual expenses at year-end. If actuals exceed estimates, tenants owe the difference. Reviewing prior-year reconciliation statements before signing gives you a realistic baseline for what to expect.
Tax Reassessment Exposure
If the property is likely to sell or has recently sold, the resulting property tax reassessment can increase your tax pass-through substantially. It’s worth asking when the building last traded and what the current assessed value reflects.
Knowing which of these terms landlords in a given submarket will actually negotiate, and which they won’t, is the kind of local knowledge that comes from working the LA commercial market across many transactions over time.
Ready to Evaluate a Commercial Lease?
NNN leases are standard in the Los Angeles commercial market, and they work well for tenants who understand what they’re agreeing to. The structure rewards preparation: knowing how to read the components, what to negotiate, and how to compare one space against another on a true cost basis.
At Lee West LA, our team works with business owners and tenants navigating commercial lease decisions across Los Angeles, from evaluating available spaces to negotiating terms that reflect what a lease actually costs. If you’re looking at NNN space and want a clear read on the numbers before you commit, reach out to us. That’s exactly the kind of work we do.
