A Practical Guide to Commercial Lease Types: How to Choose the Right One for Your Business.

Finding the right commercial space is a pivotal moment for any business—whether you’re launching a new venture, expanding to meet demand, or relocating to a more strategic location. The lease you choose doesn’t just determine your monthly costs. It shapes your flexibility, your long-term stability, and the way your business operates day to day.

At RRÍA, we work with business owners every week who are navigating these decisions. One thing is always clear: understanding the different types of commercial leases is essential before committing to a space.

This guide breaks down the major commercial lease structures, their advantages, and how to determine which model best supports your business goals.

What Exactly Is a Commercial Lease?

A commercial lease is a formal agreement between a landlord and a business tenant for the use of property designed for commercial, not residential, activity. Compared to residential leases, commercial leases tend to be:

• Longer in duration

• More customizable

• More complex in how expenses are allocated

Certain responsibilities—like taxes, maintenance, or insurance—may fall to the landlord, the tenant, or both, depending on the lease type.

Understanding these differences upfront helps you avoid surprises later.

Common Types of Commercial Leases (And What They Really Mean)

Commercial leases generally fall into a handful of well-established structures. Each one shifts costs and responsibilities differently.

1. Gross Lease

A gross lease is simple and predictable:You pay a fixed rent. The landlord covers most operating expenses, such as:

• Property taxes

• Insurance

• Building maintenance

Best for:Businesses wanting stable monthly overhead with no unexpected cost swings.

2. Net Lease

A net lease lowers base rent but adds responsibility for certain expenses. There are three variations:

• Single Net (N) – Tenant pays rent + property taxes

• Double Net (NN) – Tenant pays rent + property taxes + insurance

• Triple Net (NNN) – Tenant covers nearly all operating expenses, including maintenance

Best for:Tenants who want lower base rents and are equipped to manage or control additional costs.NNN leases are especially common in retail, industrial, and standalone commercial properties.

3. Percentage Lease

Most common in retail, a percentage lease includes:

• A base rent

• Plus a percentage of the tenant’s gross sales

This structure ties rent to performance, giving tenants flexibility during slower periods and incentivizing landlords to support foot traffic and customer draw.

Best for:Retail businesses operating in high-traffic districts or locations where sales fluctuate seasonally.

4. Modified Gross Lease

A middle-ground option.Landlord and tenant split expenses in a way that fits both parties. Often:

• Tenant pays utilities and janitorial

• Landlord handles structural maintenance and major repairs

Best for:Businesses that want predictability but still want flexibility or lower upfront rent.

How to Decide Which Lease Type Fits Your Business

No lease type is inherently better—only better for your specific business model. At RRÍA, we walk prospective tenants through the following considerations:

Location & Accessibility

Your space needs to support customer visibility, delivery access, staffing, and operational flow. The right lease is one that aligns with the realities of the location.

Lease Term Length

Most commercial leases run 3–10 years.

• Longer terms = stability but less flexibility

• Shorter terms = adaptability but potentially higher rent

Understanding your growth trajectory is key.

Total Occupancy Cost (Not Just Rent)

Base rent is one number. Your real monthly cost includes:

• Utilities

• CAM charges

• Maintenance

• Taxes

• Insurance

• Buildout

A lease type should complement your cash flow, not strain it.

Layout & Space Condition

The floor plan must match your operational work flow.

Evaluate:

• Electrical and mechanical capacity

• Plumbing needs

• Storage

• Code compliance

• Buildout costs

Sometimes a cheaper lease ends up costing more after renovations.

Renewal & Exit Clauses

Always understand:

• How renewal rent is calculated

• How increases work

• What early exit options exist

• Whether you can sublease

These details matter for long-term stability.

Real-World Lease Use Cases

Retail Storefront Example

A boutique might choose a percentage lease, allowing rent to adjust with sales volume—helpful during slower seasons.

Office Use Example

A tech company uncertain about early growth may choose a gross lease, enabling stable budgeting.

Industrial Warehouse Example

A logistics operator might prefer an NNN lease, giving them control over maintenance and improvements.

Tips for Negotiating a Commercial Lease

Negotiation can meaningfully impact your operating costs and your long-term security. Consider:

Understand Market Rates

Know what comparable properties charge for rent and CAM.In districts like downtown Elgin, rates vary block by block.

Request Tenant Improvement (TI) Allowances

Buildouts can be expensive—ask whether the landlord will contribute or share the cost.

Negotiate Predictable Rent Escalations

Avoid escalations tied to unpredictable or compound formulas.

Clarify All Maintenance Responsibilities

Define who is responsible for what—down to the HVAC filters.

Ask for Subleasing Flexibility

Business needs evolve. Subleasing or assigning a lease can save you later.

Do You Need a Leasing Agent?

Many businesses benefit from working with a professional, especially for:

• Market analysis

• Negotiation strategy

• Legal review

• Identifying red flags in leases

That said, owner–operators like RRÍA often provide a level of hands-on support and transparency that reduces the need for third-party intermediaries.

Final Thoughts: Your Lease Should Work for Your Business—not Against It

The right commercial lease is a strategic asset. It supports your cash flow, protects your flexibility, and positions your business for growth.

Before you sign anything:

• Understand your lease type

• Evaluate total occupancy costs

• Negotiate for fairness

• Ask questions—lots of them

• Seek professional guidance when needed

Your commercial space should serve your long-term vision, not limit it.

If you're exploring spaces or need guidance navigating leasing options, RRÍA is here to help—grounded in real-world operator experience and a commitment to building a stronger local business ecosystem.