The Number on the Listing Is Not the Number You'll Pay
One of the biggest surprises for first-time commercial tenants is discovering that the advertised rental rate is often only part of the story.
A retail space may be marketed at $28 per square foot, but when the lease is signed, the actual occupancy cost could be significantly higher. That's because most commercial properties in Dripping Springs utilize a lease structure that includes both Base Rent and Triple Net (NNN) expenses.
Understanding the difference between these costs is critical before signing any lease agreement.
What Is Base Rent?
Base Rent is the amount a tenant pays for the exclusive use of the leased space.
For example:
A 2,000-square-foot retail space quoted at $28.00 per square foot annually would have a base rent obligation of:
2,000 SF × $28 = $56,000 annually
Divided monthly, the tenant would pay approximately $4,667 per month in base rent.
Many business owners stop their calculations here, but additional expenses are often required.
What Are NNN Expenses?
Triple Net expenses typically include:
Property taxes
Property insurance
Common Area Maintenance (CAM)
CAM expenses often cover:
Parking lot maintenance
Landscaping
Exterior lighting
Common area cleaning
Irrigation systems
Sidewalk maintenance
Property management costs
These expenses are passed through to tenants based on their proportionate share of the property.
A Real-World Example
Imagine a retail space advertised at:
$28.00/SF Base Rent + $8.50/SF NNN
For a 2,000-square-foot space:
Base Rent:
2,000 × $28.00 = $56,000 annually
NNN Expenses:
2,000 × $8.50 = $17,000 annually
Total Occupancy Cost:
$73,000 annually
Monthly Cost:
Approximately $6,083 per month
The advertised rate and actual cost differ significantly.
Why NNN Costs Are Increasing
Several factors are contributing to rising NNN expenses throughout Hays County:
Property Tax Growth
As property values increase, tax assessments often rise as well.
Commercial landlords pass these increases through to tenants under most NNN lease structures.
Insurance Costs
Insurance premiums have increased throughout Texas due to inflation, weather-related risks, and replacement cost increases.
Utility and Infrastructure Costs
Recent utility rate increases approved by local governments are also impacting operating expenses.
These costs frequently become part of CAM budgets and tenant reimbursements.
Reviewing Historical Expenses
Before signing a lease, tenants should request:
Previous CAM reconciliations
Historical NNN statements
Property tax records
Insurance estimates
Utility expense information
These documents help create a more accurate projection of future occupancy costs.
Why Investors Care About NNN
Investors closely monitor NNN expenses because they directly affect property performance.
Well-managed properties with predictable expense structures often attract stronger tenants and higher valuations.
Properties with excessive or poorly managed operating expenses may struggle to remain competitive.
Questions Every Tenant Should Ask
Before signing a commercial lease, ask:
What are the current NNN expenses?
Have they increased recently?
What expenses are included in CAM?
Are management fees included?
Are utilities billed separately?
How are reconciliations handled?
These questions can prevent unexpected costs later.
The Bottom Line
The advertised rental rate rarely tells the whole story.
Understanding Base Rent, NNN expenses, and future operating costs allows business owners to make informed decisions and avoid budget surprises.
Looking for Commercial Space in Dripping Springs?
NestHaven Commercial helps tenants, investors, and business owners evaluate lease opportunities throughout Dripping Springs and Hays County. Contact our team to discuss available commercial properties and lease negotiations.
