Gross to NNN leases

[Mason Clark]

Does anyone have any experience transitioning tenants from a previous owner on gross leases to NNN leases? How did it go? How did you make it a smooth transition? Or any other opinions on this? It is office space with professional tenants. Financial, medical etc. Mason

[Tyler Kastelberg]

@Mason Clark @Aamir V.

Great question. Like residential tenants, commercial tenants don't want a big increase in their rent. If you elect to convert gross leases to NNN leases, you'll most likely need to reduce the rate so it is equivalent (or maybe slightly above) the amount the tenants currently pay.

Before you walk down this road, make sure the commercial units are separately metered. Some multi-unit commercial buildings are tough to lease as NNN because the utilities are on one meter.