September 25, 2026 · 6 min read

Gross vs net leases in NYC: what tenants actually pay

Most NYC tenants look at one number first: the asking rent per square foot. That number rarely tells you what you will actually pay each month. Two spaces with the same asking rent can land far apart once you add the extra charges built into the lease structure. The main thing that drives this is whether the lease is gross, net, or somewhere in between.

This guide covers how each structure works in New York, which charges tend to show up in each, and which questions to ask before you sign.

The basic difference

A gross lease bundles most building costs into the rent. The landlord pays property taxes, insurance and building operating costs, and builds an estimate of them into your rent.

A net lease separates those costs out. You pay base rent plus your share of some or all building expenses, usually as additional rent billed monthly or reconciled once a year.

Most NYC leases don't fall neatly into either type. The labels are a starting point. The real answer is in the lease clauses covering escalations, electricity and operating expenses.

The common NYC structures

Full service gross

This is common for Manhattan office space. Rent typically covers real estate taxes, building insurance, common area cleaning, lobby staffing, elevators and base building HVAC during business hours. Office cleaning inside your suite is often included in larger buildings.

"Full service" doesn't mean the rent never changes. NYC office leases almost always add escalations on top of base rent, which are covered below.

Modified gross

In a modified gross lease, some costs are included and others are billed separately. The most common split in NYC is that taxes and operating costs sit in the rent, while electricity is billed separately. Some leases also carve out janitorial, after-hours HVAC or specific repairs.

You'll see this structure for smaller office suites, loft space and mixed-use buildings.

Net, double net and triple net

  • Single net (N): you pay base rent plus a share of real estate taxes.
  • Double net (NN): base rent plus taxes and building insurance.
  • Triple net (NNN): base rent plus taxes, insurance and maintenance or common area costs.

Triple net is more common for NYC retail, especially standalone or ground floor storefronts, and for industrial space in the outer boroughs. You take on more of the variable costs of the building, and your monthly bill can move with them.

Where the extra cost actually comes from

These are the line items that usually separate the asking rent from what you really pay.

Real estate tax escalations

Many NYC leases set a base year, often the first year of the lease. If the building's property taxes go up after that year, you pay your proportionate share of the increase. Your share is usually your rentable square footage divided by the building's total.

This clause matters a great deal. Ask what the base year is, whether it reflects a full assessment or a temporary abatement, and whether any tax benefit is scheduled to phase out during your term. If the landlord's taxes are artificially low in your base year, your future escalations can grow quickly.

Operating expense escalations

Like taxes, operating expenses are often measured against a base year, and you pay your share of increases. Some older leases use a porter's wage formula, which ties increases to changes in the wage rate for building service workers rather than to actual operating costs. Ask which method your lease uses, since the two can produce very different results over a long term.

Electricity

Electricity in NYC commercial space is typically handled in one of three ways:

  • Rent inclusion: a fixed charge per square foot added to the rent, often with the right for the landlord to run a survey and adjust it.
  • Submetering: the landlord meters your usage and bills you, sometimes with an administrative markup.
  • Direct metering: you have your own utility account and pay the utility directly.

Rent inclusion is predictable but may overcharge a light user. Submetering tracks real use, but check the markup.

Common area maintenance (CAM)

In retail and net leases, CAM covers shared areas such as sidewalks, facades, common hallways and building systems. Look for what is included, whether there are caps on annual increases, and whether capital improvements can be passed through.

Rentable versus usable square footage

In NYC office buildings, rent is quoted on rentable square feet, which includes a share of lobbies, corridors and mechanical space. The space you can actually use is smaller. The gap is called the loss factor, and it varies by building. Two suites with the same rentable size can feel noticeably different in person.

Commercial rent tax

Certain Manhattan tenants south of 96th Street pay a city commercial rent tax once their annual rent passes a threshold. Whether it applies to you depends on your location, your rent and any credits available. Confirm with an accountant.

Comparing structures side by side

Cost item Full service gross Modified gross Triple net
Base rent Included Included Included
Real estate taxes In rent, plus increases over base year Often in rent, plus increases Paid by tenant, full share
Building insurance In rent Usually in rent Paid by tenant
Operating costs / CAM In rent, plus increases over base year Varies by lease Paid by tenant
Electricity Often separate (inclusion or submeter) Usually separate Paid by tenant
In-suite cleaning Often included (office) Often separate Paid by tenant
Predictability Higher Medium Lower

Read the table as a general pattern. Your actual lease language always controls.

How to compare two spaces fairly

When you're weighing options, turn each one into an estimated all-in monthly cost and an estimated cost over the full term. A practical approach:

  1. Start with base rent and scheduled annual increases.
  2. Add electricity using the lease method and a realistic usage estimate.
  3. Add any separately billed items such as cleaning, CAM or after-hours HVAC.
  4. For base year leases, ask the landlord or broker for recent escalation history in the building. It is often shared on request.
  5. Factor in free rent, the work letter or tenant improvement allowance, and who pays for the build-out.
  6. Adjust for loss factor so you're comparing usable space, not just rentable.

A space with a higher asking rent and a full service structure can end up cheaper over the term than a lower-rent net lease with volatile pass-throughs. The reverse can also be true.

Questions to ask before signing

  • What is the base year for taxes and operating expenses, and is the building in an abatement period?
  • How is electricity billed, and is there a markup?
  • Are there caps on operating expense or CAM increases?
  • Can capital improvements be passed through to tenants?
  • What is the loss factor, and how was rentable square footage measured?
  • Do I have audit rights over escalation and CAM statements?
  • Is the tenant responsible for HVAC repair or replacement?

A good tenant broker and a real estate attorney will review these clauses as a matter of course. This guide is general information, not legal or tax advice, so confirm the specifics of any lease with an attorney and any tax exposure with an accountant.

For owners and brokers

Being clear about lease structure up front saves everyone time. Listings that state the structure (full service, modified gross or net), the electricity method and the expected additional charges get more qualified inquiries and fewer surprises during negotiation.

Next steps

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