Types of commercial leases every agent needs to know

Most agents can define a residential lease in their sleep. Commercial leases are a different game — and if you can't explain the difference between a triple net and a gross lease, you're not ready to work commercial deals.

This guide breaks down the four main types of commercial leases, how each one works, and what matters most when you're advising clients. By the end, you'll have a clear mental model you can actually use.

What is a commercial lease?

A commercial lease is a legally binding agreement between a landlord and a business tenant that defines rent, operating expense responsibilities, and the terms of property use. Unlike residential leases, commercial leases are heavily negotiated and can run anywhere from one to 20+ years. The tenant protections that apply to residential properties largely don't carry over here — which means whatever your client agrees to on day one tends to stick.

There are four main types of commercial leases: net leases, gross leases, percentage leases, and variable leases. Every commercial deal you work will fall into one of these categories.

What are net leases — and what's the difference between single, double, and triple?

In a net lease, the tenant pays base rent plus some or all of the property's operating expenses. The more "nets," the more the tenant is responsible for. Net leases benefit landlords because they shift financial risk and unpredictable cost increases onto the tenant.

There are four variations:

Single net (N): The tenant pays base rent plus property taxes. The landlord covers insurance and maintenance. Example: a boutique retailer paying $2,200 a month in rent plus $5,500 annually in property taxes.

Double net (NN): The tenant pays base rent, property taxes, and insurance. The landlord handles maintenance. Example: an office tenant paying $3,300 monthly, $6,700 in annual taxes, and $2,200 in annual insurance.

Triple net (NNN): A triple net lease — often written as NNN — requires the tenant to pay base rent, property taxes, insurance, and all maintenance costs. This is the most common commercial lease structure for retail and freestanding buildings. Example: a restaurant paying $4,200 monthly plus $13,000 annually in taxes, insurance, and maintenance.

Absolute net: The tenant takes on everything — including major capital repairs like a roof replacement. This structure is rare and typically used by large national chains. Example: a major retailer paying $11,000 monthly and absorbing a $55,000 roof repair.

NNN leases are attractive to investors because income is predictable and most expense risk passes to the tenant. If you're working with investor clients, understanding the skills top commercial agents use will help you speak to this fluently.

What is a gross lease in commercial real estate?

In a gross lease, the tenant pays one fixed monthly rent amount and the landlord covers property taxes, insurance, and maintenance. This structure is simpler and more predictable for tenants, which makes it standard in office buildings and multi-tenant properties.

Gross leases come in two forms:

Full-service gross lease: The landlord covers all operating expenses. Example: a law firm leasing office space for $7,500 monthly with the landlord paying utilities, taxes, and maintenance.

Modified gross lease: Costs are split. The tenant and landlord negotiate which expenses each party handles. Example: a marketing agency paying $5,000 monthly while sharing utility costs with the landlord, who covers taxes and insurance.

The trade-off for tenants: gross lease base rents are typically higher than net lease rents because landlords price in their expense exposure. A lower base rent on an NNN can end up costing more total than a higher gross rent — this is exactly the kind of math your clients need you to walk them through.

How does a percentage lease work?

A percentage lease charges the tenant a base rent plus a percentage of their gross monthly sales above a set threshold. The breakpoint is the sales figure at which percentage rent kicks in — typically calculated by dividing the base annual rent by the percentage rate.

Percentage leases are common in shopping malls and retail centers. They align the landlord's income with tenant performance, which gives landlords an incentive to fill their center with strong retailers and maintain high foot traffic.

How the math works: A bookstore in a mall pays $2,100 monthly in base rent plus 7% of gross sales over $55,000. If the store earns $85,000 in a month, percentage rent owed is $2,100 ($85,000 − $55,000 = $30,000 × 7%).

Agents working retail deals need to understand how to calculate percentage rent and what it means for a tenant's total occupancy cost at different revenue levels. This is one of the core calculations covered in investment property work — see what it takes to succeed as an investment property advisor for more on how this fits into a broader commercial skill set.

What are variable leases, and when are they used?

Variable leases adjust rent over the lease term — either on a fixed schedule or tied to an external economic index. They're common when a tenant expects business growth and wants to negotiate a lower starting rent in exchange for scheduled increases, or when a landlord wants built-in rent escalation without renegotiating at renewal.

Index lease: Rent is tied to an economic index, most often the Consumer Price Index (CPI). Example: an office lease starting at $5,600 monthly with an annual rent adjustment equal to the CPI change. If the CPI increases 2%, rent moves to $5,712 the next year.

Graduated lease: Rent increases at preset intervals, typically annually. Example: a tech startup signing a lease at $3,300 monthly with a 3% annual escalator — rent becomes $3,399 in year two.

Index leases are harder for tenants to budget because CPI movement is unpredictable. Graduated leases offer more certainty — your client knows their year-five rent before they sign. When advising tenants, help them model both scenarios across the full lease term, not just year one.

Which commercial lease type is most common?

Triple net (NNN) is the dominant lease structure for single-tenant retail, fast food buildings, pharmacies, and gas stations. According to CBRE's 2024 U.S. Net Lease Market Report, NNN properties remain a high-demand asset class for investors seeking passive income with minimal landlord management. (Editor's note: verify current CBRE or CoStar report for specific transaction volume figures before publishing.)

Gross leases dominate office and medical office buildings. Percentage leases appear almost exclusively in shopping centers. Variable leases show up across property types when structured rent growth is a priority for either party.

Knowing which structure is standard for a given property type tells you what your client should expect — and signals to the other side that you've done this before.

How lease structure knowledge makes you a better commercial agent

Understanding lease structures changes how you advise clients and how much they trust you. A tenant who signs an NNN lease without understanding their full expense exposure can face costs 30–40% above their base rent that they never budgeted for. A landlord who agrees to a gross lease without stress-testing expense projections can watch net income shrink in a bad year.

Your job isn't just to find space or fill a vacancy. It's to make sure your clients know exactly what they're agreeing to before they sign. Lease structure fluency is the foundation of that.

How to level up:

Commercial leases aren't complicated once you have the framework. Net leases shift costs to tenants, gross leases shift them to landlords, percentage leases tie rent to sales, and variable leases build in change over time. Every commercial deal you work has one of these structures at its core — and knowing them cold is the baseline, not the ceiling.

If you're ready to take commercial real estate seriously, the Certified Commercial Real Estate Specialist program is built for licensed agents making the move into commercial. It covers property types, lease structures, calculations, listing proposals, contracts, and commercial escrow — everything you need to walk into a deal with confidence.

Explore the Certified Commercial Real Estate Specialist →