Triple Net (NNN) Lease Explained for Texas Commercial Tenants and Landlords
A triple net lease shifts taxes, insurance, and maintenance to the tenant. Here's what that actually costs in a Williamson County deal — and how to compare a NNN rate to a full-service rate without getting fooled.
A landlord quotes you $18 per square foot triple net. The space across the street quotes $26 per square foot full-service. Which is cheaper?
Trick question — they could be the same or 30 percent apart, depending on the building. Triple net (NNN) is a structure, not a price. If you don’t decode what’s stacked on top, you can’t compare.
What “triple net” actually means
In a NNN lease, the tenant pays base rent plus three additional categories directly or through reimbursement to the landlord:
- Property taxes on the building (the first “N”)
- Insurance on the building (the second “N”)
- Common area maintenance and operating expenses — CAM (the third “N”)
In a true NNN lease, the landlord receives the base rent and the tenant pays everything operational. In practice, especially in Williamson County retail and small-format industrial, “NNN” gets used loosely to mean “everything except structural roof and parking lot.”
Always confirm what’s included by reading the lease’s exclusions list, not the marketing.
What NNN typically costs on top of the base rate
In Williamson County, a reasonable rule of thumb for retail and industrial space:
- Property taxes: $3.50 to $6.00 per square foot per year. Higher in Round Rock and Georgetown, lower in Hutto and Taylor.
- Insurance: $0.50 to $1.50 per square foot per year. Depends on building age, sprinkler status, and the carrier.
- CAM: $2.00 to $5.00 per square foot per year for typical retail strip and industrial parks. Single-tenant freestanding can run lower.
Total NNN load: roughly $6 to $12 per square foot per year on top of base rent. Get the actual prior-year reconciliation before you sign — the proforma estimate is almost always low.
NNN vs. FSG: how to compare
A $26 per square foot full-service rent in an office building typically includes everything — utilities, janitorial, HVAC, maintenance, taxes, insurance, CAM. You write one check.
A $18 per square foot NNN rent in a retail space typically excludes nearly all of that. You’ll also pay separately for:
- Your own utilities
- Your own janitorial
- Interior HVAC maintenance and replacement
- All NNN charges as above
Quick math on the $18 NNN rate:
| Component | Annual cost/SF |
|---|---|
| Base rent | $18.00 |
| NNN load (taxes, insurance, CAM) | $8.00 |
| Utilities (typical retail) | $2.50 |
| Janitorial | $1.00 |
| Interior maintenance / repairs | $0.75 |
| Effective gross cost | $30.25 |
The $26 FSG rate is now cheaper than the $18 NNN rate on a true apples-to-apples basis. That happens regularly when tenants compare quotes without normalizing.
Where the gotchas live
Three places to look closely:
1. CAM exclusions. A well-drafted lease excludes capital expenditures (roof replacement, HVAC unit replacement, parking lot resurfacing), the landlord’s own debt service, and brokerage commissions from CAM pass-through. If the LOI is silent, the lease will not be.
2. Property tax pass-through on protests. Williamson County property taxes can swing materially after a successful protest. The lease should specify how a tax refund flows back to the tenant on a pro-rata basis.
3. CAM caps. Even with all the right exclusions, CAM can drift 8-12 percent per year without a cap. A controllable-expense cap of 4-6 percent per year protects you against year-five surprises.
For landlords: why NNN is worth structuring carefully
The reason landlords prefer NNN structures is predictability. Base rent escalates on a schedule; everything else is a pass-through. That stabilizes net operating income against inflation in tax assessments, insurance premiums, and operating costs.
The reason it can fail: tenant disputes over CAM reconciliation are one of the most common sources of friction in Texas commercial leases. A landlord who structures the lease cleanly upfront (clear inclusions, transparent reconciliation methodology, audit rights for the tenant) saves the relationship over the long term.
How to use this
If you’re a tenant comparing space, normalize every quote to effective gross cost per square foot before you compare. The lease structure can swing the real number by $5-10 per square foot.
If you’re a landlord, structure your NNN lease so the tenant can audit the reconciliation without friction. The deals that go bad almost always start with a vague CAM clause.
Williamson County office, retail, and industrial leases span every structure — FSG, modified gross, NNN, absolute NNN. If you want help comparing a quote against the actual market clearing rate, send me the details.