Commercial space is quoted per square foot per month, which sounds precise and is not. Two spaces quoted at different rates can cost the same, and a cheaper-looking rate can be the more expensive space. The difference is the lease structure — who pays the building’s operating costs — and it is the first question to ask about any space you are considering.
The three structures
Triple net (NNN)
The tenant pays the base rent plus a proportional share of the building’s three “nets”: property taxes, insurance, and common-area maintenance. The quoted rate is therefore not the cost. NNN is the most common structure in retail and industrial space, and the one where the gap between the quoted number and the real number is largest.
Gross (full-service gross)
The tenant pays one number and the landlord pays the operating expenses out of it. Simplest to budget for. The rate looks higher because it contains everything, and the landlord prices in a margin for the risk of expenses rising.
Modified gross
The middle. Some expenses sit with the landlord, some with the tenant, and exactly which ones is a matter of negotiation rather than convention. Common in office space. Never assume you know what a modified gross lease includes — read the expense clause, because two modified gross leases on the same street can allocate costs completely differently.
What is actually being asked here
Nobody local publishes commercial rates, so here are ours. This is every commercial space Peak has listed for lease at the moment, with the structure and, where it is estimated, the CAM. It is a snapshot of one brokerage’s inventory rather than a market survey — but it is real, current, and more than you will find anywhere else on the Central Coast.
| Space | Town | Sq ft | Structure | Base $/SF | CAM $/SF | All-in $/SF | Per month |
|---|---|---|---|---|---|---|---|
| 1211 Marsh St | San Luis Obispo | 800 | NNN | $3.20 | not stated | $3.20 + nets | $2,560 + nets |
| 4158 Bridge St | Cambria | 1,683 | Gross | $2.50 | included | $2.50 | $4,208 |
| 2432 Spring St | Paso Robles | 4,021 | NNN | $2.10 | not stated | $2.10 + nets | $8,444 + nets |
| 1131 Tama Lane | Santa Maria | 3,800 | NNN | $1.65 | $0.33 | $1.98 | $7,524 |
| 3850 Ramada Dr | Paso Robles | 1,977 | NNN | $1.25 | not stated | $1.25 + nets | $2,471 + nets |
| 5735 El Camino | Atascadero | 2,320 | NNN | $1.25 | $0.77 | $2.02 | $4,686 |
Look at the two ends of that table together and the point makes itself.
What a quoted rate really costs
The arithmetic is simple, and doing it before you tour a space saves a lot of time. Base rate plus CAM, multiplied by square footage, is your monthly number.
What does that rate actually cost per month?
Load one of our current listings, or type your own numbers over it.
On a gross lease the CAM field is zero — the operating costs are already inside the base rate. On an NNN lease it is not, and the estimate is exactly that: an estimate, reconciled against actuals at year end.
What CAM covers, and what it should not
Common area maintenance is the shared cost of running the building: landscaping, parking lot upkeep and lighting, common-area utilities, janitorial for shared spaces, security, and the property management fee. In a multi-tenant building your share is normally your square footage as a proportion of the leasable total.
Reasonable questions to ask before signing:
- Is the CAM estimate based on last year’s actuals? If it is a round number, ask what it was last year.
- Is there an administrative fee on top, and what percentage? Common, and it should be disclosed.
- Are capital expenditures included? A new roof or a resurfaced lot is usually a landlord cost, but some leases amortise capital work into CAM. Know which yours does.
- Is there a cap on year-over-year increases? Negotiable, and worth negotiating on controllable expenses.
- How is the reconciliation done, and when do I see it? You are prepaying an estimate. You are entitled to the true-up.
The terms that matter beyond structure
Escalations. Most leases here step up annually, either at a fixed percentage or tied to CPI. Over a five-year term this compounds into real money, so model it rather than glancing at year one.
Options. An option to renew is valuable and its terms matter: is the option rate fixed, tied to an index, or set at “market”? “Market” without a defined mechanism for determining it is a negotiation you will have from a weak position, because by then you have a fit-out in the space.
Tenant improvements. Who pays, who does the work, and who owns it at the end. In this market, TI allowances are more often negotiated on longer terms.
Personal guarantees. Standard for small businesses, and frequently negotiable in scope or duration even when it is not negotiable in principle.
Use and exclusivity. The use clause defines what you may do in the space. If your business might broaden, get the language broad enough now. In multi-tenant retail, an exclusivity clause preventing a direct competitor next door is worth asking for.
Which structure should you want?
As a tenant, gross is the easiest to budget and NNN gives you the most visibility into what the building actually costs — which cuts both ways, because you also carry the increases. As an owner, NNN moves expense risk to the tenant but obliges you to run a clean reconciliation every year, and doing that badly costs more in tenant goodwill than it saves in expenses.
The honest answer is that the structure matters less than the numbers inside it. A well-priced NNN space beats an over-priced gross one every time. Get the all-in figure, compare like with like, and read the expense clause.
If you want a second read on a lease you have been sent — as a tenant or as an owner — send it over. And if you are weighing this against buying, we ran that comparison here.