Published: June 2026 | By Available Warehouses — Ron Kassan & Art Minassian
The listing flyer for a San Fernando Valley warehouse says $1.47/SF/Mo NNN. That’s right at the Valley’s current average asking rate, per Colliers’ most recent SFV industrial report. But $1.47 is not what you’ll pay. Those three N’s add another $0.15–$0.30 per square foot every month — property taxes, insurance, and common area maintenance, passed through on top of base rent. On a 10,000 SF building, that’s $18,000–$36,000 a year that never appeared on the flyer.
Nearly every industrial lease written in the SFV uses this structure. So before you tour a single building, it’s worth understanding exactly what you’re signing up to pay — and which parts of it you can negotiate.
The Three N’s, and What They Cost Here
“Triple net” means the tenant pays three categories of building expenses on top of base rent, each at their pro-rata share of the property:
- Property taxes — the largest of the three in California, and the most volatile (more on that below).
- Property insurance — the landlord’s policy on the building itself. Premiums across Southern California have climbed steadily as carriers reprice wildfire and replacement-cost risk.
- CAM (common area maintenance) — landscaping, parking lot repair, exterior lighting, management fees, and shared utilities. In a single-tenant building you’re carrying all of it; in a multi-tenant park, your share is based on your percentage of the project’s square footage.
Run the numbers on a typical deal. A 10,000 SF warehouse at $1.47/SF/Mo base with $0.20/SF/Mo in operating expenses costs $16,700 a month — $14,700 in rent the flyer showed you, plus $2,000 it didn’t. Over a five-year term, the pass-throughs alone are $120,000.
That’s why we tell every tenant the same thing: compare buildings on total occupancy cost, never on asking rent. A building quoted at $1.40 with $0.32 in expenses is more expensive than one at $1.50 with $0.18.
How NNN Compares to Gross and Modified Gross
You’ll occasionally see other structures in the Valley, mostly in smaller multi-tenant flex parks.
Under a gross lease, one flat number covers everything — simpler to budget, but the landlord prices the expense risk into the rent, and “base year” provisions usually push expense increases back to you anyway. A modified gross lease splits the difference: some expenses baked into rent, others passed through, with the allocation varying deal to deal. The Cauble Group’s breakdown of who pays what under each structure is a solid reference.
For SFV industrial space above roughly 5,000 SF, expect NNN. The structure isn’t the problem — transparency is actually its strength, since you see every line item. The problems show up in how the pass-throughs behave over time.
The Prop 13 Reset Most Tenants Never See Coming
California’s Proposition 13 caps how fast a property’s assessed value can grow — no more than 2% a year — until the property sells. At sale, the LA County Assessor reassesses at the new market price, and the tax bill resets accordingly.
Here’s why that matters in the SFV specifically: a large share of the Valley’s industrial stock is 1960s–1980s tilt-up product that has been held by the same private owners — often the same families — for decades. The tax basis on these buildings is far below today’s values. When one finally trades, the new assessment can multiply the property tax bill, and under an NNN lease, that increase flows straight to the tenant.
“Tenants compare buildings on base rent and treat the NNN line as a rounding error. Then the building sells, the taxes reset, and their occupancy cost jumps mid-lease through no fault of their own. Before you sign, ask who owns the building, how long they’ve owned it, and whether they’re likely to sell — it tells you a lot about your tax exposure.”
— Ron Kassan, Executive Vice President, Available Warehouses
We’ve seen tenants absorb $0.15–$0.20/SF/Mo in added pass-throughs in a single year after a sale-triggered reassessment. On 20,000 SF, that’s $36,000–$48,000 annually that wasn’t in anyone’s budget. A long-held Burbank or Glendale building with a low tax basis can look like a bargain right up until escrow closes for the new owner.
CAM Reconciliation: The Spring Statement Worth Reading
Your monthly NNN charge is an estimate. The landlord projects the year’s operating expenses, divides by twelve, and bills you. Then, early the following year, they reconcile projected against actual — and send either a credit or a bill for the difference.
Most tenants file that reconciliation statement without reading it. Don’t. Check the management fee (3–5% of collections is typical; more deserves a question), look for capital items disguised as maintenance — a parking lot reseal is maintenance, a full replacement is a capital expenditure that shouldn’t be fully expensed to you in one year — and confirm your pro-rata share matches your actual percentage of the project.
“Read the reconciliation every spring, even when it’s a small number. The year it’s a big number, you’ll already know what normal looks like for your building — and you’ll spot the line item that doesn’t belong.”
— Art Minassian, Senior Vice President, Available Warehouses
Four Protections to Negotiate Before You Sign
The time to manage NNN risk is during lease negotiation, while you still have leverage. We covered the broader playbook in our guide to negotiating an industrial lease in the SFV; these are the four protections specific to operating expenses:
- A cap on controllable expenses. CAM increases capped at 3–5% annually over the base year. Taxes and insurance usually stay uncapped (landlords won’t take Prop 13 risk), which makes the ownership question above more important, not less.
- Capital expenditure exclusions. Roof replacement, structural repairs, and major systems should be the landlord’s cost, or at minimum amortized over their useful life rather than expensed in one year.
- Audit rights. The contractual right to review the landlord’s expense records. You may never use it; its existence keeps the reconciliation honest.
- The operating-expense history. Ask for the last two to three years of actuals before you sign. Every landlord has this, and the trend line tells you more than the current year’s estimate.
What This Means for Tenants
- Budget the full stack, never the flyer rate. At today’s averages, add $0.15–$0.30/SF/Mo to the asking rent — and compare competing buildings on that total.
- Investigate the tax basis before you commit. Long-held buildings carry reassessment risk under an NNN structure. Ask about ownership tenure, and weigh it like you’d weigh the roof’s condition.
- Negotiate expense protections up front. CAM caps, capex exclusions, and audit rights cost the landlord little to grant in today’s market and protect you for the full term.
- Read the annual reconciliation. Fifteen minutes each spring is cheap insurance against quietly absorbing someone else’s capital improvements.
About This Article
This article was compiled by the team at Available Warehouses, a specialist industrial real estate brokerage serving the San Fernando Valley, greater Los Angeles, and Southern California. Our team has closed over $600 million in industrial real estate transactions.
Looking for industrial space in the San Fernando Valley? Whether you’re signing your first NNN lease or renegotiating a renewal, our team can help. Contact us for a consultation, or call 818-939-4940.
Data in this article is sourced from publicly available brokerage research and government sources published between Q3 2025 and Q2 2026. Market conditions may have changed since publication. This article is for informational purposes only and does not constitute legal, financial, or investment advice.
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