Absolute Net
vs
Triple Net
A classic triple net (NNN) lease passes taxes, insurance, and CAM to the tenant but leaves the landlord responsible for roof, structure, and some capex; an absolute net lease pushes every expense — including roof, structure, and casualty — to the tenant, making it the most landlord-favorable lease structure.
TL;DR
Triple net is the industry default; absolute net is the premium form used with credit tenants on long-term leases. Absolute net properties trade at tighter cap rates because the landlord is essentially clipping a rent coupon.
What is Absolute Net?
An absolute net lease obligates the tenant for every expense associated with the property — operating costs, capital items, roof, structure, parking lot replacement, and often casualty and condemnation risk. The landlord's role is closer to a bondholder collecting scheduled rent than an operator. Common with credit tenants on 15–25 year leases. Walgreens, CVS, Chick-fil-A ground leases are typical absolute-net transactions.
What is Triple Net?
A triple net (NNN) lease passes three expense categories — property taxes, building insurance, and common area maintenance — to the tenant on top of base rent. Classic triple net typically leaves the landlord with roof and structural obligations and sometimes major capital items. NNN is the default structure in single-tenant retail and most industrial.
Side by side
Absolute Net vs Triple Net — the differences.
| Dimension | Absolute Net | Triple Net |
|---|---|---|
| Roof responsibility | Tenant | Landlord (classic NNN) |
| Structural responsibility | Tenant | Landlord (classic NNN) |
| Parking lot replacement | Tenant | Often landlord; varies |
| Casualty risk | Typically tenant (bondable variants) | Shared or landlord-carried |
| Typical lease term | 15–25 years with options | 10–15 years with options |
| Typical cap rate | Tighter — 50–100 bps below classic NNN | Wider — reflects landlord's operational exposure |
| Typical tenant | Investment-grade credit (Walgreens, CVS, Chick-fil-A) | Broader range: credit + regional operators |
| Rent bumps | Often flat or 10% every 5 years | Often 1.5–2% annual or 10% every 5 years |
| Landlord involvement | Minimal — closer to a bond coupon | Active — structural and capex decisions |
When to use Absolute Net
- You want the most passive possible real estate income
- You're buying a credit-tenant single-tenant property on a long lease
- You're using CRE for long-term income replacement (retirement, family-office income, 1031 replacement)
- You want cap rate compression on exit driven by scarcity of absolute-NNN credit product
- You're willing to accept a lower going-in yield for lower operational variance
When to use Triple Net
- You want a higher going-in yield than absolute-net product offers
- You're willing to manage or outsource structural responsibilities
- The tenant isn't investment-grade (regional operators don't typically sign absolute-net)
- You want shorter lease term flexibility
- You're in multi-tenant NNN where CAM-sharing models mean classic NNN fits the structure
Verdict
Absolute net is the premium product — the closest real estate gets to a bond. Triple net is the working default for most single-tenant and industrial CRE. Read the actual lease to see exactly which obligations fall where; the label is shorthand for what can be a very different allocation of responsibility.
Frequently asked questions
Is absolute net the same as bondable?
Closely related but distinct. Absolute net typically shifts all expense responsibility to the tenant. 'Bondable' adds that rent continues unconditionally through casualty, condemnation, or inability to occupy — making the lease resemble a corporate bond even more closely. Most absolute-net deals are not fully bondable.
Why do absolute net cap rates trade lower than NNN?
Absolute net means the landlord has almost no operational exposure, predictable cash flow, and typically a long-term credit tenant. Investors accept lower going-in yields for that simplicity and reduced variance. Classic triple net carries more operational risk, so it trades at wider cap rates.
Are ground leases absolute net?
Ground leases are often structured as absolute net at the land level — the tenant builds and owns the improvements and handles all property expenses. Many credit-tenant retail ground leases (McDonald's, Starbucks, Chick-fil-A) are absolute net.
Can a non-credit tenant sign an absolute net lease?
Technically yes, but it's unusual. Lenders and investors underwrite absolute net based heavily on tenant credit. A non-credit operator on an absolute-net lease would price closer to classic NNN economics.