What Are the Main Office Lease Types?

There are three main office lease types you'll encounter when renting office space for a startup: full service gross (FS), modified gross (MG), and triple net (NNN). The core difference is who pays for operating costs — the landlord or the tenant. A $45/sqft/year full service lease may cost less out-of-pocket than a $38/sqft/year NNN lease once you add taxes, insurance, and maintenance. Understanding these structures before you sign can save you thousands per month.

The Main Office Lease Types and Why They Matter

When you start looking at office space, you'll quickly notice that the quoted rent number doesn't tell the whole story. A lease at $42/sqft/year in one building and $55/sqft/year in another might end up costing you nearly the same amount each month, depending on the lease structure.

Office lease types determine who's responsible for the building's operating expenses — you or the landlord. Those expenses can include property taxes, building insurance, common area maintenance, HVAC, utilities, and janitorial services. Depending on the lease type, those costs are either bundled into your base rent or billed to you separately.

For a startup signing its first real office lease, this distinction matters a lot. You're budgeting for a fixed monthly burn. Surprise bills for building insurance or property tax escalations can throw that budget off in ways that hurt. Knowing what you're signing, and what's hiding beneath the headline rent number, is the first step to signing a lease you can actually live with.

The three structures you'll run into most often:

• Full Service Gross (FS): Most costs bundled into one rent check
• Modified Gross (MG): Hybrid — some costs included, some split or passed through
• Triple Net (NNN): You pay base rent plus most or all operating expenses separately

There's also a fourth worth knowing: Industrial Gross (IG), a modified gross variant common in warehouse-adjacent or flex/industrial spaces where you typically pay utilities but the landlord covers taxes and insurance.

Each structure has its own risk profile. Here's what each one actually means for your monthly bill.

What are Full Service Gross (FS) Leases?

A full service gross (FS) lease is the simplest structure from a tenant's perspective: you pay one number, and nearly everything is included. Property taxes, building insurance, common area maintenance (CAM), utilities (often), and janitorial services are all baked into the rent.

This is the most common lease structure in Class A office buildings in major startup markets like San Francisco, New York City, and Boston.

What's typically included in an FS lease:

• Base rent
• Property taxes
• Building insurance
• Common area maintenance (CAM)
• HVAC (during business hours)
• Janitorial/cleaning (often)
• Utilities (sometimes — confirm per building)

What's typically NOT included:

• After-hours HVAC (usually billed separately at $50–$150/hour)
• Internet and phone
• Suite-level janitorial beyond standard cleaning
• Furniture, AV, and buildout costs

Example monthly bill — FS lease:

A 1,500 sqft office in Flatiron at $72/sqft/year (full service):

• Monthly rent: $9,000
• Estimated extras (internet, occasional extra cleaning): $300–$600/month
• Total effective monthly cost: ~$9,300–$9,600

The appeal for startups is predictability. One number, easy to budget. The tradeoff is that FS leases tend to carry higher headline rents because the landlord has priced operating risk into the base.

One thing to watch: expense stop clauses. These cap how much of the operating expenses the landlord absorbs. If building costs rise above that stop, you pay the overage. In a rising-cost environment, that clause can hurt.

What are Modified Gross (MG) Leases?

A modified gross (MG) lease is a hybrid. You and the landlord negotiate which operating expenses are included in the base rent and which you pay separately. There's no universal standard — every MG lease is different, which is both its flexibility and its danger.

In practice, MG leases often mean:

• Landlord covers: property taxes, insurance, and structural maintenance
• Tenant covers: utilities, janitorial, and sometimes a proportional share of CAM increases over a base year

Modified gross leases are especially common in older or boutique office buildings, character loft spaces, and smaller landlord-owned properties. If you're looking at space in DUMBO or Williamsburg in Brooklyn, Hayes Valley or Jackson Square in San Francisco, or Boston's Innovation District, you're likely to run into MG structures.

Example monthly bill — MG lease:

A 1,200 sqft office in NoMad at $58/sqft/year (modified gross, tenant pays electric):

• Monthly base rent: $5,800
• Estimated electricity: $250–$400/month
• Internet: $200–$400/month
• Total effective monthly cost: ~$6,250–$6,600

When you're reviewing an MG lease, get a written list of exactly which line items are included and which aren't. Don't assume.

Industrial Gross (IG) is a subtype of modified gross more common in industrial or flex/warehouse spaces. The landlord typically covers taxes and insurance; you handle utilities and sometimes interior maintenance. If you're in hardware, biotech, or anything manufacturing-adjacent and looking at spaces like Dogpatch in SF or the Brooklyn Navy Yard, you'll probably see IG leases.

What are Triple Net (NNN) Leases?

A triple net (NNN) lease means you pay base rent plus your proportional share of three "nets": property taxes, building insurance, and common area maintenance. In some NNN leases, your exposure goes further — capital repairs, roof, structure.

NNN leases are more common in retail and industrial real estate than in traditional office settings, but they do show up in single-tenant buildings, owner-occupied conversions, and some suburban or non-Class-A properties. If a landlord quotes you a very low $/sqft number, ask whether it's NNN. The add-ons can be substantial.

What a NNN tenant typically pays separately:

• Base rent (low headline number)
• Pro-rata share of property taxes
• Pro-rata share of building insurance
• Pro-rata share of CAM (maintenance, landscaping, parking lots, etc.)
• Sometimes: capital repairs, roof, structural

Example monthly bill — NNN lease:

A 1,500 sqft office in a suburban/flex building at $32/sqft/year (NNN):

• Monthly base rent: $4,000
• Estimated NNN add-ons (taxes + insurance + CAM): $8–$15/sqft/year → $1,000–$1,875/month
• Utilities + internet: $400–$600/month
• Total effective monthly cost: ~$5,400–$6,475

That "cheap" $32/sqft lease is suddenly looking like $45–$52/sqft all-in. NNN leases introduce variability that's genuinely hard to model when you're tracking monthly burn. That said, they do offer one real advantage: transparency. You see the actual operating costs of the building rather than paying a landlord's markup on them.

How the Main Office Lease Types Compare

Here's a side-by-side look at the four structures you're most likely to encounter:

For most early-stage startups signing a 12- to 24-month lease in NYC, SF, or Boston, modified gross is what you'll see most often, unless you opt for a 3+ year lease in a Class A tower. NNN is rarely the right call for a startup's first private office unless the all-in economics are clearly better.

Hidden Costs to Watch For, Regardless of Lease Type

Even the most landlord-friendly FS lease won't protect you from every surprise. Before you sign, get answers on each of these:

After-hours HVAC: Most full service leases include HVAC during standard business hours — typically 8am–6pm, Monday through Friday. Nights, weekends, holidays? Usually $50–$150/hour per zone. If your engineering team regularly runs late, this adds up fast. Get an estimate based on your actual hours before you sign.

Internet infrastructure: Virtually no lease includes internet service. But some buildings also charge for conduit access or require you to use a preferred provider at a premium. Ask before you assume you can bring in your own ISP at standard rates.

Electricity metering: In some MG and FS leases, electricity is submetered per tenant rather than included. You may not find out until you get a lease, so ask early.

Cleaning frequency: Standard janitorial in an FS lease is typically 5 nights/week light cleaning. If your team needs daily deep cleaning or specific services, that's an add-on.

Tenant improvement (TI) allowance: Not an ongoing cost, but it affects your upfront capital needs. Some landlords offer TI allowances — dollars per sqft toward your buildout — especially in longer-term leases. In a hot market, TI is harder to get. In a softer market, it's worth pushing for.

Insurance requirements: Commercial leases require you to carry general liability and sometimes other coverage. Budget $50-100/month for a small office. Your landlord will specify minimum coverage levels in the lease.

For guidance on how your space needs change as headcount grows, and how to build in flexibility from the start, see how to estimate office square footage for a scaling team.

How to Evaluate Lease Types When You're Comparing Spaces

The practical move when you're touring spaces and comparing offers: always convert to an all-in $/sqft/year number. Don't compare a $55/sqft FS lease against a $38/sqft NNN lease at face value. Model the operating cost add-ons for the NNN space and find the effective rate.

Here's how:

1. Ask the landlord for a full operating cost estimate (taxes, insurance, CAM) for NNN or MG spaces — get the prior year's actual number if you can
2. Add estimated utilities based on your team size and hours. The U.S. Energy Information Administration publishes commercial building energy use benchmarks by building type — useful for sanity-checking landlord estimates
3. Add after-hours HVAC estimates based on your team's actual work pattern. One note, the bill for this racks up quickly. Try to avoid after hours HVAC where you can
4. Calculate the all-in monthly number and divide back to $/sqft/year for an apples-to-apples comparison
5. Model the escalation risk: In NNN and MG leases, operating costs can rise year over year. Ask for three years of actual operating expense history for the building

Once you've run the numbers, it's usually pretty clear which space is actually cheaper. The lowest headline rent is almost never the lowest all-in cost.

You can browse private offices on Tandem to see lease type and pricing context already surfaced, so you're not piecing this together from scratch.

What to Do Before You Sign Any Office Lease

Regardless of lease type, here are the moves that protect you most:

• Read the expense stop and base year clauses in FS and MG leases — these define your upside cost exposure
• Get a rent comps analysis for the neighborhood so you know whether the quoted rate is fair (Tandem can help with this)
• Negotiate the deposit structure: NYC typically requires 3 months with a Good Guy Guarantee; SF is usually 2–3 months
• Ask about sublease rights: if you need to exit early, can you sublease? What's the landlord approval process? This clause matters more than most founders realize when they're signing

Getting an expert involved early — before you submit a Letter of Intent — means you have someone on your side who's read hundreds of these leases and knows where the costs hide. Tandem handles sourcing, touring, LOI drafting, and lease negotiation at no cost to you (paid by the landlord). Browse private offices on Tandem to see what's available in your market right now.

Office lease types aren't the most exciting thing you'll deal with as a founder. But getting this right is one of the highest-leverage decisions you'll make in the first few years. A lease you actually understand is one you can manage.

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Last updated: September 2026