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SEO Meta Description: Discover the ins and outs of a full service lease in commercial real estate, ensuring a comprehensive understanding of tenant responsibilities and the benefits of this leasing arrangement in the US.

When navigating the world of commercial real estate, it's crucial to understand the various lease types available. One such lease that stands out is the full service lease. This article aims to demystify the concept of a full service lease in commercial real estate, shedding light on its benefits, tenant responsibilities, and how it differs from other leasing arrangements.

What is a Full Service Lease in Commercial Real Estate?

A full service lease, also known as a gross lease, is a leasing arrangement commonly used in commercial real estate. Unlike other lease types where tenants are responsible for paying separate expenses, such as insurance, maintenance, and utilities, a full service lease simplifies matters by including these costs in the rent.

  1. Benefits of a Full Service Lease

A full service lease offers several advantages for both landlords and tenants:

  • Financial Predictability: With a full service lease, tenants can accurately forecast their monthly expenses since all costs are rolled into a single rent payment. This eliminates the uncertainty associated with variable expenses
The full gross service lease differs from a triple net lease (NNN). In the NNN lease structure, the tenant covers all of the property's operating expenses. In contrast, in a full gross service lease the landlord shoulders all of these costs.

What is the difference between a lease and a service agreement?

In a lease, the lessor provides the asset to the lessee, who benefits from it throughout the lease term. In a service contract, the customer receives economic benefit from the service provided by the lessor.

What is a service lease?

A service lease is an arrangement where the owner and lessor of the equipment maintains and services the asset and allows the asset operator operational flexibility by permitting the pick-up and drop off of equipment through the lease term .

What is the most common commercial lease?

A net lease is perhaps the most common form of commercial lease agreement. With a net lease, the tenant is responsible for a base rent payment, plus additional expenses associated with the property.

What is meant by a full service lease?

A full service lease is a lease in which a tenant pays only a base rate, and the landlord is responsible for paying all other expenses. Full service leases often contain an expense stop, a point above which a tenant becomes responsible for contributing to the operating expenses of the property.

What is the difference between gross and full service gross?

Full-service and gross leases are generally the same, with some investors referring to them as full-service gross leases. these terms refer to leases that are structured with the tenant paying one rental rate (including base rent and operating expenses).

How do you calculate the NOI of a full service gross lease?

To calculate NOI, subtract all operating expenses incurred on a property from all revenue generated on the property. The operating expenses used in the NOI metric can be manipulated if a property owner defers or accelerates certain income or expense items. The NOI metric does not include capital expenditures.

Frequently Asked Questions

What is service level in real estate?

A Service Level Agreement (or SLA) is the part of a contract which defines exactly what services a service provider will provide and the required level or standard for those services.

What is the meaning of full service?

Full-service in American English

(ˈfulˈsɜːrvɪs) adjective. Commerce. offering or providing a wide range of services related to the basic line of business, as when a filling station changes tires or makes car repairs in addition to selling gasoline.

What does fully rented mean?

Full Rent or Rent means the Basic Rent, Additional Rent, Late Charges and any and all other sums payable by Tenant to Landlord as provided in this Agreement.

What does $6 NNN mean?

NNN – Triple Net –This type of lease rate includes the base rental rate plus the three N's. One “N” stands for property taxes, one for property insurance, and the final “N” stands for common area maintenance (CAMs).


What is the difference between CAM and NNN?

When seeking NNN properties for sale or a commercial retail outlet lease, it is vital to understand how CAM differs from NNN. CAM is an acronym for Common Area Maintenance, while NNN features three nets, including CAM, property tax, and insurance.

What is difference between NN and NNN?

The main difference between a triple net (NNN), double net (NN) and gross lease in commercial real estate is the amount of financial responsibility the tenant has.

What is the meaning of FS in lease?

Full service lease

A full service lease is a lease in which a tenant pays only a base rate, and the landlord is responsible for paying all other expenses. Full service leases often contain an expense stop, a point above which a tenant becomes responsible for contributing to the operating expenses of the property.

What is an example of a fee simple?

The fee simple owner may do anything they wish on the land, as long as it falls within established easements and zoning laws. This means you can add a bedroom to your home, build a second-story addition, create a new garage or tear down your entire home and build a new one from scratch.

What is a full service lease in commercial real estate

What is a fee simple property in Hawaii?

“Fee simple” means that you buy a property and own it indefinitely. Of course, you're responsible for any mortgage payments, property taxes, and local fees, but you can: Sell the property to someone else, rent it out, or pass it on to another owner in the case of your death.

Why is it called fee simple?

The term fee simple derives from the word fief, or a piece of land that was held for servants in exchange for the provision of labor to the land's true owner.

What does FS mean in Hawaii real estate?

Fee Simple

Fee Simple (FS) properties are the most common form of land tenure in Hawaii and most of the continental United States. Fee simple in layman's terms means that you own the land (or a proportionate interest in the land if it is a condo) and the structure on top of the land (unit if it is a condo) until the end of time.

What is an example of a full service property?

For example, if you leased a 3,000 SF space with a $30 per SF full-service lease rate, the breakdown of payments would be: Full-Service Lease Rate: 3,000 SF x $30 per SF per year = $90,000 per year, or $7,500 per month. Included in the $7,500 per month amount is both the base lease rate and the operating expenses.

  • What are full service properties?
    • Full-service properties will focus on offering a wide range of services, scaling the offer based on the category of the hotel. Beyond the larger variety in guest rooms, they can also offer lounges, meeting spaces, workspaces, function spaces, ballrooms, fitness and spa centers, as well as a pool or even retail areas.

  • What does SF mean in real estate?
    • In the commercial leasing industry, $/SF/year or $/SF/yr means the rent per square foot per year. Why is this important? This is because most commercial rental rates are usually quoted in dollars per square foot on an annual basis.

  • What is the difference between NNN and FSG?
    • A tenant with a FSG lease pays the same amount of rent every month, making budgeting for expenses easier, which is a big benefit for newer businesses. On the other hand, a tenant with a NNN lease pays a lower base rent plus the landlord's operating expenses.

  • What is an example of a modified gross lease?
    • Modified gross leases are common when multiple tenants occupy an office building. In a building with a single meter where the monthly electric bill is $1,000, the cost would be split evenly between the tenants. If there are 10 renters, they each pay $100.

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