San Francisco Commercial Lease Guide: NNN vs Gross (Full Service) Explained

Two San Francisco spaces are quoted at “$60 per square foot.” One will cost you $60. The other will cost you $73. The difference is the lease structure — and misreading it is the most common (and most expensive) mistake first-time commercial tenants make. Here is how the three structures used in San Francisco actually work.

Full service (gross) — the office standard

In a full-service lease, one rate covers base rent plus the building’s operating costs: property taxes, insurance, maintenance, common-area utilities, and usually janitorial. Most San Francisco office space — Financial District towers, Class B mid-rises — is quoted this way. The catch is the base year: you pay your share of operating-expense increases above the year you signed. On a multi-year term those escalations are real money, and the base-year definition is negotiable.

NNN (triple net) — the retail and industrial standard

Under a triple-net lease you pay base rent plus your pro-rata share of the three “nets”: property taxes, building insurance, and common-area maintenance (CAM). In San Francisco retail and industrial, NNN pass-throughs typically add $8–$15 per square foot per year on top of base rent. So a Valencia Street storefront at “$60 NNN” with $13 of pass-throughs is really a $73 space. Always ask for the trailing 2–3 years of actual NNN charges — and negotiate caps on controllable CAM increases.

Modified gross — the in-between

Common in SOMA creative buildings and smaller properties: base rent includes some expenses (often taxes and insurance) while you pay others directly (your own utilities, sometimes janitorial). There is no standard definition — the lease language is the only truth. Get the expense matrix in writing before comparing against other options.

Converting everything to total occupancy cost

This is the only apples-to-apples comparison that matters. We build this table for every space on a client’s shortlist before touring.

The SF-specific clauses to watch

• Proposition 13 reassessment: if the building sells during your NNN term, property taxes can jump dramatically — and flow straight through to you. Negotiate protection from sale-triggered reassessment where possible.
• Load factor: SF towers commonly quote rentable square footage 15–18% above usable. A “10,000 SF” suite may give you 8,500 usable — which changes your real cost per desk.
• After-hours HVAC: full-service buildings charge $50–$150/hour beyond standard hours. For teams working late, this quietly becomes five figures a year.
• CAM audit rights: the right to audit the landlord’s expense reconciliation. Standard to request, frequently omitted from first drafts.
• Percentage rent (retail): some SF retail deals trade lower base rent for a share of sales above a breakpoint — good for seasonal concepts, bad math for high-volume ones.

Which structure should you want?

You rarely get to choose — product type dictates structure. What you can choose is how well the variable parts are capped, documented and audited. In a soft market like 2026, landlords concede on exactly these clauses, because they cost less than losing the tenant. That is where tenant-side representation earns its keep — and in San Francisco it costs tenants nothing, since landlords pay the fee.