How Long Do Triple Net Leases (NNN) Last?

Triple-net leased (NNN) properties can be suitable investments if you’re looking for real estate that offers potentially stable cash flow and minimal management. This is because a triple net tenant is responsible for property taxes, insurance costs, maintenance expenses, and rent.

However, the length of a NNN lease can differ from a gross lease, where you’re responsible for all property expenses. As such, it’s essential to understand the typical lease-term lengths of a triple-net to determine how it might impact your investment strategy.

NNN Lease Terms

Most, though not all, triple-net leases are long-term. Depending on the tenant's business model and property type, initial lease terms can range from ten to 25 years and longer. Some NNN leases may have shorter terms, particularly for smaller tenants or multi-tenant properties.

Many NNN leases have several built-in renewal options. These options include the length of the term extension (typically five or ten years) and rent increases. However, renewal options are at the tenant’s discretion and are not guaranteed.

Lease terms and extensions benefit the tenant, who can remain in one place longer and build a loyal customer base. It also benefits you, the investor. The lease extensions mean you could depend on a steady cash flow without the frustration and cost of looking for a new tenant.

Factors Influencing Lease Duration

The following factors can determine a triple net lease’s term:

• Property type: Not all NNN properties are the same. Retail properties like drug stores or fast-food chains can have lease terms of 25 years. Meanwhile, office or industrial properties could have shorter terms of 10 or 20 years.
• Tenant profile: A tenant’s creditworthiness and company also impact the NNN lease duration. Larger corporations with high credit ratings often sign longer lease terms.
• Customization and build-out costs: Properties requiring tenants to build out or improve the space could mean longer lease terms. This allows tenants to recoup their property investments.
• Market conditions:Markets with high demand and limited supply can lend themselves to longer lease terms—tenants might not want to chance that they’ll be left without space after the lease expires. In a more competitive market, you might have to offer a shorter lease term to attract the tenant.

NNN Leases: Generally Long Term and Stable

If you’re considering a NNN property investment, your due diligence should include the tenant’s creditworthiness, market conditions, location, property type, and other factors. Partnering with a broker or other professional with NNN property experience is also a good idea.

A triple net lease tenant is typically in place for many years, though market conditions, corporate profile, and build-outs can influence the lease’s length. The right NNN properties can add stability and diversity to your real estate portfolio, potentially providing reliable cash flow with minimal management efforts.

The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.