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Factoring Triple Net Charges When Negotiating

Pat Darcy Retail Division Head commercial real estateFactoring Triple Net Charges When Negotiating

By Pat Darcy

Sometimes I receive calls from people looking to open a business and lease retail space for the first time. They inquire about the quoted lease rate for a particular building or shop space in a retail center.  I give them the quoted lease rate and then mention what the estimated “triple net” charges are for that particular location. More often than not they have no idea what these “triple net” charges are.

New tenants need to ask retail brokers about triple net charges as these additional charges can be as much as $2.00 SF to over $7.00 SF quoted on a yearly basis. In most retail leases they are referred to as Additional Charges – Adjustments. These estimated  “triple net” charges cover the Tenants pro rata share of their space or building square footage. Triple Net charges are always estimated because the Landlord does not know from year to year what the real estate taxes, insurance and maintenance etc. are going to be.

The following is a list of what these charges may entail.

  • All real estate taxes, including assessments, all insurance costs, and all costs to maintain, repair, service and replace the Common Areas.
  • Reasonable reserves for the costs of repairing, re-roofing, painting and resurfacing the Common Areas;
  • All costs to supervise and administer the Shopping Center. Said costs may include a property management fee in connection with same and shall in any event include a fee to Landlord to supervise and administer same in an amount equal to ten percent (10%) of the total costs of Section one above;
  • Any parking charges, utilities surcharges, or any other costs levied, assessed or imposed by, or at the direction of, or resulting from statutes or regulations, or interpretations thereof, promulgated by any government authority in connection with the use or occupancy of the Premises or the parking facilities serving the Premises; and
  • Any costs to inspect, repair, maintain or replace the heating, air conditioning and fire protection  systems and equipment (including fire sprinklers) serving the Premises, including the cost of a preventative maintenance contract providing for the regular inspection and maintenance of same. Landlord shall be responsible for obtaining a service contract for repairs and maintenance of the heating and air conditioning system serving the Premises.

So, newcomers to the retail market remember – when calling about retail space – always ask the broker what the Landlord is quoting for triple net charges. This will help as you put your budget together.

Contact Pat Darcy


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