An NNN lease, short for triple net lease, shifts three specific costs onto the tenant that a landlord would otherwise carry: property taxes, building insurance, and common area or structural maintenance. The name comes from those three "nets." It sits at one end of a spectrum of commercial lease structures, opposite a gross lease where the landlord bundles those costs into rent and manages them directly.
The Three Nets, Explained One at a Time
The first net is real estate taxes, meaning the tenant reimburses or pays directly whatever the county assesses on the property, which in Marion and the surrounding counties can shift meaningfully after a reassessment cycle. The second net is insurance, typically the building's hazard and liability coverage, sometimes carried by the tenant's own policy and sometimes reimbursed to the landlord under the landlord's master policy. The third net is maintenance and common area upkeep, covering everything from parking lot striping to HVAC repair, though structural elements like the roof and foundation are frequently carved out and left with the landlord depending on how the specific lease is negotiated.
Gross, Modified Gross, and Triple Net Compared
In a gross lease, common in older Indianapolis office buildings, the landlord pays taxes, insurance, and maintenance out of the rent collected and absorbs the risk if those costs rise faster than rent does. A modified gross lease splits the difference, with the tenant covering some expenses like utilities or janitorial while the landlord retains others. A true triple net lease pushes essentially all of it to the tenant, which is why NNN rents are usually quoted lower per square foot than gross rents covering the same space; the number on the lease is only part of the tenant's actual occupancy cost.
Why the Structure Matters More to a Buyer Than a Tenant
For a tenant, an NNN lease means variable annual costs that can rise with reassessments or insurance premium increases, which is a real consideration for a business budgeting rent. For a buyer, though, the structure is what makes the income predictable enough to underwrite with confidence, since the landlord isn't exposed to a spike in property taxes or a roof replacement eating into net operating income the way they would be under a gross lease. That predictability is the entire reason NNN assets trade at the cap rates they do.
How This Shows Up in the Indianapolis Market
Local NNN product tends to cluster around single-tenant retail and quick-service buildings along corridors like 96th Street, Keystone Avenue, and the US-31 spine through Greenwood, where a national or regional tenant has signed a long-term lease on a standalone building. Buyers evaluating this product locally should read the actual lease, not just the listing summary, since carve-outs for roof and structure vary by landlord and can materially change what "triple net" means on a specific building.