Industrial Gross Lease: A Clear Guide for Tenants & Landlords

An industrial gross lease is common in warehouses, manufacturing, and R&D facilities. In this structure, the tenant pays base rent plus some operating expenses, while the landlord covers others. Think of it as a middle ground between a full-service (landlord pays most costs) and triple net/NNN (tenant pays most costs).

Key idea: with an industrial gross lease, who pays what is defined in the lease—don’t assume. Local customs vary.

How an Industrial Gross Lease Works

• Base Rent: Fixed amount for occupying the space.
• Tenant-Paid Items (typical): Utilities (electric, gas, water), janitorial for the premises, sometimes minor repairs.
• Landlord-Paid Items (typical): Structural components (roof, exterior, foundation), building systems maintenance (subject to carve-outs), common area upkeep.
• Common Areas (CAM): May be included in rent or shared—confirm how CAM is calculated and reconciled.
• Flexibility: Parties can shift line items either way; the lease should list inclusions/exclusions and any caps/escalations.

Quick Example

A 50,000 SF distribution tenant under an industrial gross lease pays base rent + its suite utilities and janitorial. The landlord handles roof, structure, and site maintenance; CAM is included in rent with an annual reconciliation and a 5% cap on controllable expenses.

Industrial Gross vs. Modified Gross vs. Net (NN / NNN)

Naming conventions differ by market. Always rely on the definitions in the lease, not the label.

• Industrial Gross (IG): Tenant pays base rent plus selected expenses (often utilities/janitorial). Landlord retains big-ticket items (e.g., roof/structure).
• Modified Gross (MG): Similar concept with clearer line-item allocation. Base rent often includes more operating costs; tenant still covers direct-use items like utilities.
• Double Net (NN): Tenant typically pays property taxes and insurance (net of those to landlord), plus base rent; landlord handles structure.
• Triple Net (NNN): Tenant pays taxes, insurance, and CAM/operating costs in addition to base rent; landlord retains structure unless negotiated otherwise.

If your lease is described as “industrial gross with double-net features,” it likely means tenant pays taxes and insurance in addition to base rent—functionally close to NN. Confirm in the expense section.

What’s Typically Included/Excluded

Common tenant obligations

• Premises utilities and janitorial
• Routine interior maintenance
• Potential share of CAM if not included in rent

Common landlord obligations

• Structure (roof, exterior, foundation)
• Major building systems and site maintenance (subject to carve-outs)
• Property management oversight

Pro tip: Ask for a responsibilities matrix (one page, line-item list of who pays what). It prevents disputes later.

Pros & Cons

For Tenants

• Pros: Simpler budgeting than NNN; fewer maintenance burdens; negotiable line items.
• Cons: Base rent can be higher; less control over building ops; risk of opaque pass-throughs if not itemized.

For Landlords/Investors

• Pros: Attractive to tenants seeking simplicity; control over asset condition; stable income via higher face rent.
• Cons: Expense volatility sits with landlord; diligence needed to manage OPEX; margin pressure if taxes/insurance spike.

Is an Industrial Gross Lease Right for You?

• High-variability users (manufacturing, robotics, wet labs) often prefer to control their own utilities but shift big structural risks to the landlord.
• Predictability seekers may favor modified gross (more included in rent) or push for caps on pass-throughs in IG.
• Cost-sensitive tenants should model total occupancy cost (base rent + expected expenses) across IG vs. NN/NNN to see true all-in pricing.

Negotiation Playbook (Tenant or Landlord)

1. Define everything: Attach a schedule listing taxes, insurance, CAM categories, utilities, janitorial, repairs (who/what/limits).
2. Set caps: Negotiate caps on controllable CAM and clarify what “controllable” excludes (e.g., taxes, insurance, utilities).
3. Audit & transparency: Include audit rights, CAM statements, and backup documentation requirements.
4. Repairs & replacements: Distinguish routine repairs (tenant) from capital replacements (landlord); address proration of capital over useful life.
5. Taxes & insurance (if applicable): If tenant pays, seek change-in-law protections and notice before large re-assessments or policy changes.
6. TI and delivery: Secure tenant improvement allowance or turnkey scope; define delivery condition (power, loading, clear height, floor load, lab services if applicable).
7. Options & flexibility: Pursue renewal/expansion/contraction and sublease rights; align term with business plan.
8. Utilities: Separate metering where possible; confirm capacity (amps, gas, water) and any backup power obligations.

Key Takeaways

• “Industrial gross” is not one-size-fits-all. The definitions in the lease control your total occupancy cost.
• Compare IG to MG/NN/NNN using a total cost of occupancy model, not just face rent.
• Lock in clarity up front—line items, caps, audit rights, and repair responsibilities are where deals win or lose.

Considering an industrial lease or renewal? IPG helps tenants and owners structure clear, cost-efficient agreements that fit real operations—warehouse, robotics, life sciences, and beyond. Contact us to pressure-test your terms before you sign.