A broker quotes you a warehouse at a rate per square foot. That number is the beginning of your occupancy cost, not the end of it. Tenants who budget from the quoted rate routinely find their actual outgoings materially higher — not because anyone misled them, but because US industrial leases quote rent and bill everything else separately.
This guide walks through what gets added, in the order you will meet it.
The quoted rate, and what it excludes
Most US industrial space is leased on a triple net (NNN) basis. The tenant pays base rent plus three categories of pass-through: property taxes, building insurance, and maintenance — the latter usually appearing as CAM, common area maintenance.
So the quoted rate is base rent only. The NNN charges are estimated by the landlord, billed monthly alongside rent, and then reconciled.
For scale: JLL reported US industrial asking rents at $10.45 per square foot with national vacancy at 6.8% in its Q2 2026 market dynamics reporting, while CBRE put vacancy at 6.5% in the same period. Those are national averages across a very wide range — coastal infill space and Midwestern bulk distribution are not remotely the same price — and they are quoted on a triple net basis, so they are base rent before pass-throughs. Use them for orientation only and get current figures for your actual submarket.
Two quoting conventions to watch for. Rates may be quoted per year or per month per square foot depending on the market, and a monthly quote looks dramatically cheaper if you misread it. And confirm whether the quoted rate is NNN or something else — gross and modified gross leases exist, and comparing a gross quote to a NNN quote without adjusting produces a badly wrong answer.
How NNN charges actually work
The mechanism matters because it determines your exposure.
The landlord prepares an annual operating expense budget, calculates each tenant's pro rata share — typically by the tenant's square footage as a proportion of the building — and collects that estimate in equal monthly instalments through the year.
After year end, usually within 90 to 180 days depending on the lease, the landlord reconciles estimate against actual. If actual costs exceeded the estimate, you owe a true-up. If the estimate was high, you receive a credit or refund.
The consequence: your NNN charge is an estimate you are obliged to top up. A tenant who budgets the first year's estimate as a fixed cost can receive an unexpected bill months after year end. Property taxes are the usual culprit, particularly where a building has recently sold or been reassessed.
Things worth negotiating here:
- A cap on controllable expenses. Landlords typically resist capping taxes and insurance, which they do not control, but management fees and maintenance are more negotiable.
- Audit rights. The right to inspect the landlord's books supporting the reconciliation.
- Exclusions. Capital expenditure, structural repair, and roof replacement should generally not appear in an operating expense pass-through, but they sometimes do.
- A defined reconciliation deadline, after which the landlord loses the right to bill you.
Escalations
Base rent almost always increases annually. Escalations may be a fixed percentage or tied to an index such as CPI.
Over a five- or ten-year term, this compounds into a large number, and it is the single most under-modelled term in industrial leasing. Model the rent in the final year of the term, not the first — that is the number that determines whether the deal is affordable when you are most committed to it.
A fixed escalation is predictable; an index-linked one transfers inflation risk to you. If you accept index linkage, negotiate a cap.
Measurement
Confirm what you are paying for. Rent is charged on a stated area, and whether that area is measured to the outside of the walls, includes a share of common areas, or includes mezzanine and office space varies. A load factor applied to your usable area increases the rentable area you pay for.
Ask for the measurement standard used and, on a large building, consider verifying it. A few percent of error on a large footprint over ten years is real money.
The build-out
Very few warehouses are ready for your operation as they stand. Office fit-out, racking clearances, dock equipment, lighting, power upgrades, and floor repair are all commonly needed.
Tenant improvement allowance (TI) is the contribution the landlord makes toward this work. Terms to pin down:
- The amount, usually expressed per square foot.
- What it may be spent on. Landlord-favourable definitions exclude anything removable — which can mean racking and equipment, the very things you most need.
- Who controls the work, and whether you may use your own contractors.
- When it is paid — on completion, in stages, or as a rent credit. Cash flow differs enormously between these.
- What happens to unspent allowance. Frequently it is simply lost.
Anything the allowance does not cover is your capital cost on day one, before you have shipped anything.
Free rent
Rent abatement during build-out is common and is often easier for a landlord to concede than a lower rate, because it preserves the headline rent for valuation purposes. That makes it a productive place to push. Establish whether abatement covers NNN charges as well as base rent — frequently it does not.
Restoration and return condition
Read the surrender clause before signing. You may be required to return the building in its original condition, which can mean removing racking, mezzanines, and improvements you paid to install. On a large fit-out this is a significant end-of-term liability, and it is rarely budgeted at the start.
Negotiate for the landlord to identify at lease signing which improvements must be removed, rather than leaving it to their discretion years later.
Security
Covered in detail in Do You Need a US Entity to Lease a Warehouse?, but for budgeting: expect a deposit, and if you have no US credit history expect either a substantially larger deposit, a letter of credit, or a parent guaranty. A letter of credit generally requires collateral. That is working capital tied up for the term.
Everything that is not the lease
The lease is one line in your occupancy cost. A complete comparison against a 3PL quote, or between two buildings, needs:
- Base rent, escalated across the full term
- NNN charges — taxes, insurance, CAM — with true-up exposure
- Utilities, which for a large lit and conditioned building are not trivial
- Racking, forklifts, dock equipment, and maintenance
- A warehouse management system and integration work
- Fully loaded payroll: wages plus employer taxes, benefits, and recruiting
- Your own insurance programme
- Packaging and consumables
- Business personal property or inventory tax, where the state levies it — see Inventory and Property Tax by State
- Build-out costs above the TI allowance
- Restoration liability at term end
The comparison that matters
Because clear height and column spacing determine how much you can store in a given footprint, cost per square foot is the wrong comparison metric. Two buildings at the same rate per square foot can differ substantially in pallet positions.
Convert every candidate to all-in occupancy cost per pallet position per year: total annual cost including pass-throughs, divided by the pallet positions the building actually yields for your storage method. The rankings frequently invert. The building with the higher rate per square foot is often the cheaper building.
Sources
- JLL, U.S. Industrial Market Dynamics — national asking rent and vacancy
- CBRE, U.S. Industrial & Logistics Figures — national vacancy and leasing trends
- Link Logistics, Triple Net Leases in Industrial Real Estate
- CapVeri, Triple Net (NNN) Lease CAM Reconciliation Guide — estimate-and-reconcile mechanics and reconciliation timing
Market figures are national averages at a point in time and vary widely by submarket. This guide is general information, not legal or financial advice.