Many gym owners see a space advertised at $20 per square foot and think it’s affordable. Then the first bill arrives and it’s far higher. The culprit is usually an NNN lease.
What to know
NNN stands for “triple-net.” In this lease, tenants pay base rent plus their share of property taxes, building insurance, and common area maintenance (CAM). For gyms, CAM can cover things like parking lot lighting or landscaping. These extra costs often add 25–40 percent on top of the base rent.
Action steps
- Always ask for a breakdown of CAM, taxes, and insurance for the past three years.
- Add these numbers to the base rent to calculate your true monthly obligation.
- Push for a cap on controllable CAM increases, often 3–5 percent per year.
- Secure the right to audit operating expenses so you can verify charges.
- Understand how big repairs (like roof or HVAC) are handled — are they included in CAM or separate?
Numbers to run
If your base rent is $10,000 and NNN adds $3,000, your true rent is $13,000. A common mistake is budgeting only for the base rent and ignoring extras. Over a year, that’s $36,000 in unplanned costs.
Questions to ask
- What were CAM charges for the past three years?
- Are there planned capital projects that could spike CAM?
- Is there a cap on annual increases?
Next step
An NNN lease isn’t always bad, but you must calculate the total occupancy cost before committing. A low base rent can hide a high total rent.