What’s in This Guide
Key Takeaways
- Every commercial lease sits somewhere on one line. At one end the landlord pays for everything and charges you one number. At the other end you pay for everything, including the roof.
- A base rate means nothing until you know the structure behind it. A gross number and a net number are not comparable, and the net one is always the smaller-looking of the two.
- Modified gross is the most common office structure and the most misunderstood, because base year and expense stop variants split the cost very differently.
- The only fair comparison is total occupancy cost: base rent, plus your share of expenses, plus utilities and janitorial, spread across the full term after free rent and improvement dollars.
Two landlords quote you space in the same town. One number looks meaningfully lower than the other. Half the time the lower number is the more expensive deal, and the reason is that nobody told you which lease structure each quote was written in. Understanding the structures is the single highest-return hour a commercial tenant can spend.
One line, from gross to absolute net
Forget the alphabet soup for a second. Every commercial lease answers one question: which of the four cost buckets does the tenant pay, on top of base rent? The buckets are property taxes, building insurance, maintenance and repairs, and utilities. A full service gross lease puts all four on the landlord. An absolute net lease puts all four on you, plus the roof and the structure. Everything else is a point in between.
Seen that way the names stop being jargon and start being shorthand. Industry definitions for most of these terms are published by NAIOP. The table below is the whole spectrum in one place.
| Lease type | Base rent covers | Tenant pays on top | Where you see it |
|---|---|---|---|
| Full service / gross | Taxes, insurance, maintenance, utilities, janitorial | Little or nothing beyond in-suite extras and after-hours HVAC | Multi-tenant office, small suites, coworking |
| Modified gross, base year | All operating expenses at the level of the first year of the term | Your pro rata share of any increase above that base year | The most common office structure in Connecticut |
| Modified gross, expense stop | Operating expenses up to a stated dollar stop | Your share of everything above the stop | Office, usually in negotiated or renewal deals |
| Industrial gross | Taxes, insurance, exterior and structural maintenance | Utilities, interior maintenance, janitorial, sometimes snow and trash | Older multi-tenant industrial and flex buildings |
| Single net (N) | Insurance, maintenance, structure | Property taxes | Rare on its own, mostly a stepping stone term |
| Double net (NN) | Roof, structure, sometimes common area | Property taxes and building insurance | Single-tenant retail, some industrial |
| Triple net (NNN) | Roof and structure, and only if the lease says so | Taxes, insurance, maintenance, CAM, utilities | Retail, industrial, net lease investment property |
| Absolute net / bondable | Nothing at all | Every cost, including roof, structure, and rebuilding after a casualty | Credit tenant sale-leasebacks, long-horizon investment |
| Percentage | Depends on the underlying structure, often gross or NNN | Base rent plus a percentage of gross sales above a breakpoint | Malls, anchored retail centers, some restaurants |
| Ground lease | Land only | Everything, and the tenant builds and owns the improvements for the term | Pad sites, long-term development, franchise buildings |
| Build-to-suit | A custom building the landlord constructs for you | Usually structured as triple net once occupancy begins | Distribution, manufacturing, single-user headquarters |
Full service and modified gross
A full service gross lease is one number. Taxes, insurance, maintenance, utilities, and janitorial are baked into the rate and the landlord absorbs the variability. Small office users should generally want it. The catch is that the landlord prices that risk into the rate, so a full service quote always looks higher than a net quote on the same building.
True full service is rarer than tenants expect, because landlords stopped wanting to eat expense inflation. What replaced it is modified gross, and its variants behave very differently.
Base year. The landlord covers operating expenses at their level in the first year of your term, and you pay your share of increases after that. The trap is the base year itself. If the building was half empty then, expenses were artificially low and your share of the year two increase is brutal. Ask for a gross-up provision that states expenses as if the building were substantially occupied.
Expense stop. Same idea, different anchor. The lease names a dollar amount per square foot instead of a year, and you pay everything above it. Easier to model, and it removes the base year problem.
Industrial gross. The warehouse version: landlord carries taxes, insurance, and the exterior, tenant carries utilities and everything inside the four walls. Read it closely, because industrial gross is defined by local custom rather than any standard, and two landlords in one market will not mean the same thing by it.
Single, double, triple, and absolute net
Net leases move cost buckets to the tenant one letter at a time. Single net adds property taxes. Double net adds taxes and insurance. Triple net adds taxes, insurance, and maintenance, which in practice means CAM, the parking lot, the landscaping, the HVAC service contract, and often HVAC replacement if the lease is written aggressively.
Two things trip tenants up here. The base rate is not the rent: the rent is the base rate plus the pass-through, and that estimate belongs in writing before you sign. And triple net has no fixed definition. Whether roof and structure stay with the landlord is negotiated, and it is the most expensive sentence in the document.
Absolute net, sometimes called bondable, is the end of the line. The tenant pays everything with no exclusions and no outs, including rebuilding after a fire. You see it in sale-leasebacks with credit tenants, where the whole point is an income stream a lender can underwrite like a bond.
Percentage, ground, and build-to-suit
Percentage lease. Standard in malls and anchored retail. You pay base rent plus a percentage of gross sales above a breakpoint. The natural breakpoint is annual base rent divided by the percentage rate, so overage rent starts only once sales support the base. It aligns the landlord with your success and it means the landlord reads your sales figures. Negotiate what counts as gross sales, because online orders fulfilled from the store, returns, and gift card redemptions all need a rule.
Ground lease. You lease the dirt, build the building, and own the improvements for the term before they revert to the landowner. Terms run long because the tenant is amortizing a building. Common on pad sites and franchise locations. Financing one is its own project, since the lender’s security is a leasehold rather than land.
Build-to-suit. The landlord constructs a building to your specification and leases it to you, almost always on a long triple net term. The negotiation happens on the drawings and the budget, because the rent is derived from the cost. Our post on build-to-suit leases covers the structure. It comes up more often in Connecticut than it used to, since Central Connecticut industrial vacancy sat at 4.5 percent in the second quarter of 2026 (Cushman and Wakefield) and a user who cannot find the right building has to consider building one.
Comparing two offers apples to apples
There is only one honest way to compare lease proposals, and it is total occupancy cost across the full term. Base rate alone is a marketing number.
Restate both as full service
Take the base rate, add the estimated expense pass-through, add utilities if separately metered, add janitorial if it is yours. Now the two numbers describe the same thing.
Check the measurement
Rentable and usable square feet are different, and the load factor between them varies building to building. Two identical rates on two load factors are two different deals.
Spread the concessions
Total the rent you actually pay across the whole term, subtract the improvement allowance, divide by the term and the square footage. That effective rate frequently reverses the ranking of the face rates.
Model the escalations
A fixed annual bump and an increase tied to an index behave very differently over a long term. Run both offers out to the last year, not just the first.
Read the expense exclusions
Capital improvements, the management fee, leasing commissions, and costs specific to other tenants should never land in your reconciliation. Get the exclusions in the lease and an audit right to check them.
The landlord underwrites you in parallel with all of this. Our post on the financials needed to lease commercial space covers what they ask for, and our lease negotiation playbook covers the terms themselves.
Which structure fits which tenant
A small tenant in a multi-tenant building. Push for full service or modified gross. You control neither the roof, the boiler, nor the parking lot, so you should not carry the risk on any of them. Budget certainty is worth paying for when one HVAC failure could be a real share of your annual occupancy cost.
A single-tenant industrial user. Triple net usually makes sense. You are the only occupant, you control the wear, and you would rather manage your own vendors than pay a landlord’s markup. Carve out roof and structure, and get a condition report at delivery so you do not inherit a twenty-year-old rooftop unit. Our guide to warehouse rent in Connecticut is the baseline for this asset class.
Retail. The structure follows the property. Malls and anchored centers run percentage leases, strip centers and freestanding buildings run triple net. Either way, exclusivity, co-tenancy, and the CAM definition decide your outcome more than the base rate does.
A long-term investor. If you are buying rather than leasing, the structure is the product. Absolute net and bondable leases with credit tenants trade at a premium precisely because a lender can underwrite the income without worrying about a roof. Current inventory is on our commercial listings page.
One statewide note for 2026: Connecticut tenants are pressing harder for operating cost transparency than they did a few years ago, alongside shorter initial terms and better improvement allowances (Jennings 2026 outlook). A landlord who will not put the expense estimate in writing has told you something about the reconciliation you are going to get.
Not Sure Which Structure You Are Being Quoted?
Send us the proposals. We will restate them in the same terms, tell you what the pass-throughs are likely to run, and tell you which one is actually cheaper across the term.
Have Us Compare Your Offers
Or call John Famiglietti directly: 203-596-7777
Frequently Asked Questions
What is the difference between a gross lease and a net lease?
In a gross lease the landlord pays the property taxes, insurance, maintenance, and usually utilities out of the rent you pay, so you get one predictable number. In a net lease you pay some or all of those costs on top of a lower base rent. A net quote almost always looks cheaper than a gross quote for the same space, because the pass-through costs are not in the number yet.
Is a triple net lease cheaper than a gross lease?
Not necessarily, and the base rate will not tell you. Triple net shifts taxes, insurance, and maintenance onto the tenant, so the true cost is the base rate plus those pass-throughs. Ask the landlord for a written current-year estimate of taxes, insurance, and CAM per square foot, add it to the base rate, and only then compare against a gross quote. Triple net does give a tenant more control over vendors and service levels, which has its own value.
What is a modified gross lease?
A middle ground between full service and net. The landlord covers operating expenses up to a fixed reference point, and the tenant pays a proportionate share of anything above it. The reference point is either a base year, meaning expenses at their level during the first year of the term, or an expense stop stated as a dollar amount per square foot. Base year deals should include a gross-up provision so a partly vacant building does not produce an artificially low base.
Which lease type is best for a small business?
For a small tenant in a multi-tenant building, a full service or modified gross lease is usually the better fit, because you have no control over the systems whose costs you would be asked to share. Predictable occupancy cost is worth a higher face rate when one roof repair or boiler failure could be a large share of your annual rent. A single-tenant user who controls the whole building is the tenant for whom triple net starts to make sense.
Sources and Further Reading
Primary sources
This article provides general information, not legal, accounting, tax, lending, or valuation advice. Lease terms, requirements, and market conditions vary by property, municipality, and transaction, and may change. Verify material information with qualified professionals before relying on it.
