What is the difference between a NNN lease and a MG lease?

In our Tucson Industrial Market we have two main types of leases, NNN and MG (Modified Gross). Over the past month I have had prospective tenants very confused with NNN lease rates and in some cases, upset. The NNN lease rate is typically around $.20 lower than the more common, Modified Gross lease rate and can be deceiving in some cases and that's why it's helpful to understand what you're getting with each type of lease.

In simplest terms, the NNN lease rate (in most cases) does not include property taxes, common area maintenance charges, building insurance, water, and trash. The Modified Gross lease rate (in most cases) does include, property taxes, building insurance, common area maintenance charges, water, and trash. After paying the NNN rent the tenant will have to pay NNN fees (common area maintenance charges, water, trash, property taxes, insurance, etc). A tenant that occupies 10,000 SF of a 100,000 SF building will pay for 10% of the total NNN fees. 

In the Tucson Industrial Real Estate Market NNN leases are much more common in larger spaces (5,000 SF and up) than smaller spaces. 

Here's an example of a couple lease rates that you may see;

MG rate: $.68 per sf
NNN rate $.48 per sf with NNN fees at $.20 per sf

Notes, the NNN lease rate doesn't always advertise the NNN fees so always make sure you request the NNN fees before signing a lease. 

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