Two spaces, two lease proposals, two rent numbers. The lower-rent space looks like the better deal, and it may be — or it may cost you more every year you're in it. The difference is not the rent. It's the lease structure, and specifically the word or two next to the rent number that decides who pays the building's operating costs. Get that wrong and you can sign the "cheaper" lease and write a larger check every month.

This is the part of a lease most practice owners skim, because it reads like accounting rather than real estate. But the structure is where the real money lives. Here is how the common structures work, why medical space so often lands in the most exposed one, and how to compare two proposals on the number that actually matters — your total cost to occupy the space.

Full-service / gross: one number, landlord carries the rest

In a full-service gross lease, you pay one rent number and the landlord pays the building's operating costs out of it — property taxes, insurance, common area maintenance (CAM), utilities, management. Your rent is your rent. If the roof needs work or taxes jump, that's the landlord's problem to absorb, at least during your term.

Why it matters: predictability. A gross lease caps your exposure at a number you can budget around. That is worth real money to a practice, because your occupancy cost stops being a variable you can't control.

The catch — and there's always a catch — is that a true full-service gross lease is rare in medical space, and where it exists the landlord has already priced their expected costs (plus a cushion) into that single number. You're paying for the predictability. That can be a fair trade. Just don't assume "gross" means "cheaper"; it usually means "known."

Where to negotiate: if a landlord offers gross, pin down exactly what's included. "Full-service" sometimes excludes things you'd assume were covered — after-hours HVAC, janitorial for medical waste, your own suite's utilities if separately metered. Get the inclusions in writing, and watch the next clause carefully, because most "gross" medical leases aren't actually gross.

Triple-net (NNN): base rent plus your share of everything

In a triple-net (NNN) lease, the rent number is only the beginning. On top of base rent you pay your pro-rata share — your suite's square footage as a percentage of the building — of the three nets: property taxes, building insurance, and CAM. These are billed on top of rent, estimated monthly, and reconciled once a year against what the building actually spent.

Why medical space is so often NNN: medical and dental build-outs are heavy. Plumbing, extra electrical, specialized HVAC, lead-lined walls, higher water use. Landlords lease this space net specifically so that operating costs — which a medical tenant drives up — flow through to the tenant rather than sitting on the landlord's books. In many medical office buildings, NNN is simply the house structure and gross isn't on the menu.

Why it costs: the pass-throughs are real, they compound, and they only go up. A reassessment after the building sells, a new roof amortized back to tenants, rising insurance in a hard market — all of it lands in your reconciliation. The base rent stays flat and the nets creep, so your effective cost in year five is meaningfully higher than year one even on a "fixed" rent.

Where to negotiate: this is where a tenant earns back the whole cost of representation. Ask for a cap on controllable expenses — a ceiling on how much the CAM portion can rise year over year, with 3–5% a common ask. Press for it to be non-cumulative, so the landlord can't bank unused room from a quiet year and spend it in a heavy one. Taxes and insurance are usually left uncapped because the landlord can't control them, but management fees, landscaping, and maintenance can be capped. Ask for the prior two years of actual reconciliations before you sign, so the estimate you're quoted isn't fiction. And insist on an audit right — the ability to inspect the landlord's books if a reconciliation looks off. The cap, the audit, and what actually belongs in CAM are the whole game on a net lease — we walk that clause in CAM and operating expenses.

Modified gross and base-year: the hybrids

Most medical leases are neither pure gross nor pure NNN. They're some flavor in between, and the two you'll meet most are modified gross and base-year.

A modified gross lease splits the costs. The landlord carries some (often taxes and insurance) and you pay others directly (often your own utilities and janitorial). It's a negotiated middle, and the only thing that matters is reading exactly which line items sit on which side of the ledger.

A base-year lease is the one that trips people up. Your rent covers the building's operating expenses as they stood in a fixed reference year — the base year. From then on, you pay only your share of the increases over that base. It sounds tenant-friendly, and it can be, but the base year is a negotiation, not a given. A low base year (one where the building's costs were artificially low — say it was half-empty, or taxes hadn't yet been reassessed after a sale) means larger increases passed to you sooner.

Where to negotiate: push for the base year to be the year you take occupancy, not an earlier year with a suppressed number. Watch for a building that's about to sell or be reassessed — a fresh base year set just before a tax jump protects you; one set just after leaves you paying the jump. And make sure the base year is calculated on a fully assessed, fully occupied building, so a later lease-up doesn't inflate your share of the increase. A low base year is its own trap; we spelled it out in base year and expense stops.

How to compare true occupancy cost across structures

Here's the discipline that beats the trap at the top of this piece. Never compare base rents. Compare total annual occupancy cost per square foot, structure included.

For each proposal, build one number:

  • Base rent per square foot.
  • Plus the pass-throughs you'll actually pay — for NNN, that's the estimated nets; for base-year, the projected increases over base; for gross, often zero on top. Get these as real figures from the landlord's history, not a placeholder they quote you.
  • Plus anything billed directly to your suite that the structure doesn't cover — utilities, janitorial, after-hours HVAC.
  • Across the full term, with the annual escalations applied. A fixed annual bump on base rent behaves very differently from a bump tied to CAM growth, and a gross number that rises with the whole building's costs is not the same as a net number that rises only with base rent.

Do that and the lower-rent NNN space and the higher-rent gross space are finally on the same footing. Often the lower base rent loses once the nets are counted — sometimes it wins because its building runs lean and its cap is tight. You cannot know which until you've built both total numbers. This is also where the build-out enters the math: a dental fit-out runs around $250 per square foot in our market, and which structure a landlord offers often tracks how much of that they're contributing in tenant improvement allowance. A richer allowance can justify a costlier structure.

So which is better?

Neither, and that's the honest answer. Gross buys you predictability — you trade some potential upside for a number you can bank on, which is worth a lot to a practice that can't absorb a surprise reconciliation. NNN gives you a lower base and, if you negotiate the caps and audit rights well, a genuinely competitive total cost — but you carry the variability, and in a rising market that variability points one direction.

The right structure depends on your appetite: predictability versus potential. A mature practice with tight cash flow usually wants the ceiling. A practice with room to absorb swings might take the lower net base and manage the exposure with a hard cap. What no one should do is choose on the base rent alone, because the base rent is the one number the structure is designed to make you overweight.