Why Lease Type Determines Value
The same building with the same rent can have a dramatically different value depending on the lease structure. A NNN lease transfers expense risk to the tenant, making income more predictable and justifying a lower cap rate (higher price). A gross lease keeps all expense risk with the landlord, requiring higher cap rates to compensate — or careful underwriting of expense growth.
NNN vs. Gross: The NOI Impact
With a gross lease at $10,000/month, if property taxes rise $500/month, your NOI drops $500/month. With a NNN lease at the same rent, the tenant absorbs that increase. Over a 5-year hold, the NOI difference compounds significantly — directly impacting your IRR and exit value.