Gross vs Modified Gross vs NNN Lease: Which Works Best for Office Space?

It comes down to how much cost risk you want to carry. With a gross lease, you pay one number and the landlord covers building costs. A modified gross lease covers those costs for a starting year, called the base year. After that, you pay any increase. A triple net (NNN) lease is base rent plus your share of taxes, insurance, and upkeep, billed on top. For most small and mid-size office tenants in DFW, we'd pick modified gross. It's predictable without the full-service markup.

Open any Dallas office listing site and you'll run into this.

One suite says $26 NNN. Another down the road says $19.50 plus electric. A third says $35 full service. Your gut says the $19.50 one wins. It might. It might not. Honestly, these numbers alone won't tell you.

Each one leaves out different costs. It's like comparing a pizza price before toppings with one that already includes delivery and tip.

We manage commercial properties across the DFW Metroplex. We see owners and tenants trip over this all the time, usually right when the first year-end bill shows up.

Here's how each lease type works, and what they really cost in Dallas right now.

What Is a Gross Lease (Full-Service Gross) for Office Space?

A gross lease is the simplest deal around. You pay rent. The landlord pays to run the building.

In office listings, it shows up as "full-service gross," or FSG. The rate includes taxes, insurance, janitorial, utilities, and repairs.

Tenants love it for one reason: no surprises. You pay the same amount in January as in December.

But nobody hands over risk for free. Landlords build expected cost increases into the rate. TenantBase puts full-service rates about 10% to 15% above comparable NNN base rates.

One more thing. Plenty of "full-service" leases quietly pass along increases after year one. Find that clause. If it's there, you've got a modified gross lease with a nicer name.

What Is a Modified Gross Lease and How Does the Base Year Work?

You can consider modified gross as a shared tab.

The landlord covers the building's operating costs for the first year of your lease. That year is your base year. If costs rise later, you cover the difference. Just the difference.

The base-year amount has a name you'll see in every lease: the expense stop. It's where the landlord's share stops.

Say operating costs run $10 a square foot in 2026. Next year they hit $10.80. You owe the extra 80 cents on your space. That first $10? Still the landlord's.

DFW has its own popular flavor of this, called "plus electric." Rent covers everything except your suite's power bill. A North Dallas building listed suites this year at $19.50 plus electricity, with a 2026 base year. Electricity there added about $2.08 per square foot.

This setup is everywhere in North Texas office space. If you're touring multi-tenant buildings here, expect to see it a lot.

What Is a Triple Net (NNN) Lease in Office Space?

NNN is the "pay as you go" model. You pay base rent, then your share of three extra buckets:

• Property taxes
• Building insurance
• Common area maintenance

The landlord guesses those costs at the start of the year. You pay the guess every month. Then, once a year, the landlord compares the guess with reality. That's called the reconciliation.

Sometimes you get money back. More often, in our experience with Texas taxes and insurance lately, you get a bill.

NNN rates always look cheap on a listing. That's because you're only seeing part of the price. TenantBase shows how fast it adds up: $3,000 in monthly NNN rent can become $3,800 to $4,200 once the extras hit.

In DFW, you'll mostly find NNN in suburban buildings, single-tenant buildings, and medical offices. The big downtown and Uptown towers lean full-service.

Gross vs Modified Gross vs NNN: How They Compare Side by Side

Here's the quick version, all in one place.

Who Pays for Taxes, Insurance, CAM, and Utilities in Each Lease

A tenant assumes cleaning, or electricity is included in the rent. Later, he finds a separate charge on the bill. Get a written breakdown of what you pay and what the landlord covers. Do this before signing.

This table is a starting point. Individual leases can divide these costs differently.

Read the roof and structural repair clauses carefully. Some leases, including those described as absolute NNN, can place these obligations on the tenant. If the wording makes you responsible for major building repairs, have an attorney review it before you sign.

What Office Space Costs in Dallas-Fort Worth in 2026

For a sense of the wider market, CBRE's Q3 2026 report puts average asking rent at $35.09 per square foot. Vacancy stood at 24.6%, though leasing activity had picked up from the previous quarter.

Source: CBRE Dallas/Fort Worth Office Figures, Q3 2026.

Nearly a quarter of the office space measured was vacant. That may give tenants room to negotiate, especially in buildings with several available suites. Ask about a rent-free period, help with fit-out costs and limits on expense increases.

Your options will still depend on the building and location. CBRE reported falling vacancy and rising asking rents in Q3, so compare a few suitable properties before deciding what to offer.

What a $26 NNN Office Rate Could Cost

A quoted rate of $26 per square foot does not tell you the full cost of an NNN lease. You also need the operating expense estimate and any separately billed utilities.

Using the figures below, a 3,000-square-foot suite would cost about $9,315 a month. That is before any other charges in the lease.

These estimates add $2,815 a month to the base rent. Ask for the latest expense budget and check which charges are included. The final bill may change when actual expenses are reconciled.

The ad said $26. The real number is $37.26. That's a 43% jump from what caught your eye.

Now hold it next to the DFW full-service average of $35.09. The "cheap" space costs a bit more than average.

Is it a bad building? Not at all. It's just priced in a way that makes the first number look friendlier than it is.

Upflex has a tip we like: "calculate your cost per occupied seat, not cost per square foot." Your accountant will thank you.

What Happens to Your Rent When Building Costs Go Up?

This is where lease types really show their colors.

Higher operating expenses can change your office budget even when the base rent stays the same. Take the same 3,000-square-foot suite. If the expenses charged to your space rise by $1 per square foot, that adds $3,000 a year, or $250 a month.

Who pays that increase depends on the lease. This example assumes the full increase can be passed through, with no expense cap or exclusion.

In this example, modified gross and NNN produce the same $3,000 increase. That does not mean their total costs are the same.

Under a base-year modified gross lease, the rent includes an agreed level of expenses. The tenant then pays eligible increases above that amount. With NNN, the tenant pays base rent plus a separate share of operating expenses from the start.

Any of these arrangements may involve estimated payments and a year-end adjustment. Before signing, check which expenses can increase, how your share is calculated, and whether the lease limits those increases.

A truly fixed gross lease is the only full shield. Good luck finding one past a year or two.

Which Office Lease Type Is Best for Your Business?

There's no single right answer. There's a right answer for you.

If you made us pick one for the typical DFW small business? Modified gross. It's the Goldilocks choice. Not excessively rigid, not too risky.

Gross vs NNN From the Owner's Side: What Landlords Should Know

Own an office building? Every tenant benefit above is a cost on your side of the table.

Full-service gross leases your space faster. It also leaves you holding the bag when taxes or insurance spike. Price it a little low, and your margin shrinks every year of the lease.

With an NNN lease, owners can recover expenses from tenants, but someone still has to manage the accounts. That means preparing estimates, sending bills, and checking what was collected against the actual costs at the end of the year. Errors can cause disputes, especially when tenants can inspect the records.

For a modified gross lease, pay close attention to the base year. If much of the building is empty, some operating expenses may be lower than usual. As tenants move in and those costs rise, existing tenants could face a bigger increase than they expected.

A gross-up clause can help account for this. It adjusts occupancy-based expenses to an agreed occupancy level. Check which expenses it covers and whether the same calculation applies to the base year and later years.

For owners, either arrangement needs clear records. You should be able to explain each charge and show how you calculated it.

Office Lease Clauses Worth Negotiating Before You Sign

Before signing, ask how the extra charges will work. The rent may fit your budget, but the rest of the lease deserves just as much attention:

• A cap on annual increases in controllable expenses, with a clear definition of what counts as controllable
• A list of excluded costs, including mortgage payments and any capital improvements the landlord cannot charge to tenants
• How base-year expenses will be adjusted for occupancy
• Your right to review expense records and challenge a charge
• A deadline for the annual reconciliation bill, so an old charge does not arrive long after you expected it
• Any rent-free period and how much the landlord will contribute toward fitting out your office
• After-hours heating and air-conditioning charges, particularly if your team regularly works evenings or weekends

Taxes and insurance usually can't be capped. The landlord doesn't control them either. But janitorial, landscaping, and management fees? Those are open for discussion.

How GOTO Property Management Helps DFW Office Owners

We manage commercial properties across Dallas-Fort Worth, including office buildings and retail centers. We take the tedious parts of commercial leasing off your plate.

That means setting up base years and expense stops correctly from day one. It means monthly CAM billing and reconciliations your tenants can actually follow. We handle janitorial, landscaping, and repair vendors. You get clear monthly financials. Your tenants get someone who answers the phone.

Own an office building in DFW? See our commercial management services or check our pricing.

Common Questions About Office Lease Types