What is the difference between a net lease and a gross lease?
Under a net lease, the tenant pays for its share of operating expenses, insurance and property taxes in addition to its rent. Under a gross lease the costs are included with the rent. From an evaluation perspective, all the costs associated with the rent should still be evaluated. For instance, everything else being equal, a property that leases for $10/SF/Year (Net) with expenses of $8/SF may not be as attractive as a property with a rental rate of $17/SF (Gross). There are also variations on both Net leases and Gross leases, such as a modified gross in which a tenant pays a gross rent, but also pays for increases in expenses. In some Net leases, the Landlord may include the real estate taxes with the rent, but the tenant pays for the other costs.
