Last reviewed: October 2026 | Next scheduled review: November 2026
Most people asking about NNN want the same two things. A plain answer to what a triple net lease actually is, and someone local who can find and vet one.
Here is both.
What a NNN lease actually is
A triple net lease is a commercial lease where the tenant pays base rent plus three additional categories of cost: property taxes | insurance | maintenance. Cornell Law School’s definition puts it directly: the lessee pays rent and utilities “as well as three other types of property expenses: insurance, maintenance, and taxes.”
The owner collects rent. The tenant carries the operating cost.
That is the whole idea. Everything else is a variation on how completely the cost transfers.
How the net structures stack
- Single net (N) | tenant pays base rent plus a pro rata share of property taxes
- Double net (NN) | tenant pays base rent plus taxes and insurance
- Triple net (NNN) | tenant pays base rent plus taxes, insurance and maintenance
- Absolute net | tenant pays everything, structural and capital items included
- Full service or gross | tenant pays one flat number and the landlord absorbs the operating expense
The distinction that costs people money
“NNN” and “absolute NNN” are not the same lease, and the gap between them is the roof.
Many leases marketed as NNN still leave roof, structure and major capital expenditures with the landlord. An absolute net lease shifts every cost, structural and capital included, to the tenant.
If you buy a building on the assumption that NNN means zero landlord obligation, and the lease carves out roof and structure, you have bought a capital reserve requirement you did not underwrite. Read the carve-outs before you read the cap rate.
How long these leases run
Long. Cornell Law School describes triple net leases as generally long term, most commonly 10 or 15 years, and sometimes much longer. CLA (CliftonLarsonAllen) puts the common span at 10 to 20 years with scheduled rent increases built in, and CompStak notes those increases are usually fixed annual bumps or tied to CPI.
The length is the point. Long term plus credit tenant plus escalations is what makes the income look like a bond instead of a business.
What Sacramento NNN deals look like in 2026
Real figures, dated, with the source named. Nothing here is a projection.
Cap rates, national single-tenant net lease, Q2 2026
The Boulder Group’s Q2 2026 Net Lease Research Report:
- Overall net lease | 6.82 percent, up 2 basis points
- Retail | 6.60 percent, up 5 basis points
- Industrial | 7.25 percent, up 10 basis points
- Office | 7.90 percent, unchanged
These are national single-tenant figures, not Sacramento-specific. Treat them as the benchmark you underwrite against, not the price you will pay.
The Sacramento retail market, Q3 2026
For retail NNN, this is the fundamentals picture underneath the income. Kidder Mathews’ Q3 2026 Sacramento retail report, data source CoStar:
- Vacancy | 5.9 percent, down 10 basis points from 6.0 percent in both Q2 2026 and Q3 2025
- Average asking rent | $1.55 per SF per month, up 4.25 percent from $1.49 a year earlier, and a cent below Q2 2026
- Net absorption | 144,573 SF in the quarter. Year to date 399,906 SF, against negative 38,952 SF over the same period in 2025
- Under construction | 184,486 SF, down 65.18 percent from 529,775 SF a year earlier
- Average retail cap rate | 6.7 percent, up 10 basis points from 6.6 percent a year earlier. That covers all Sacramento retail sales, not only NNN
What that combination means in plain English. Vacancy eased, rents are up more than 4 percent on the year, absorption swung from negative to strongly positive, and the construction pipeline is down by roughly two thirds. Less new supply arriving into a market that is absorbing space is the condition that supports existing rents, and existing rent is what a NNN buyer is paying for.
The industrial side
Kidder Mathews’ Q2 2026 Sacramento industrial report, the most recent posted as of October 1, 2026:
- Direct vacancy | 6.5 percent, with total availability at 10.2 percent
- Average asking rate | $0.79 per SF per month, NNN, down from $0.82 the prior quarter
- Net absorption | 130,029 SF in the quarter. Year to date 137,118 SF
Note how that rent is quoted. $0.79 NNN means the tenant pays that number plus the three nets. Kidder Mathews quotes Sacramento industrial asking rents this way, which is worth knowing before comparing a NNN quote to a gross quote and thinking you found a bargain.
The California detail that changes your NNN math
This one is specific to California and it gets missed by out-of-state buyers constantly.
Under Proposition 13, the Sacramento County Assessor states the property tax rate is fixed at 1 percent of assessed value plus any assessment bond approved by popular vote, with annual increases capped at the lesser of California CPI or 2 percent. Property is reappraised only on a change in ownership, on completed new construction, on new construction unfinished at January 1, or when market value drops below the factored Prop 13 value.
A sale is generally a change in ownership.
So a building held for twenty years may be assessed far below what you are about to pay for it. When you close, it reassesses to your purchase price, and the property tax line jumps.
Who absorbs that increase is negotiated, not automatic
Here is where a lot of NNN marketing overstates the case, and it is worth being precise about.
A NNN lease assigns property taxes to the tenant as a category. It does not by itself settle what happens when a sale resets the assessment. That is a separate, specific term, and it is bargained.
The clearest evidence is the form library transactional attorneys work from. Thomson Reuters Practical Law publishes two opposing California standard clauses aimed at this exact event:
- Pro-landlord | “Proposition 13 Real Property Tax Reassessment Pass-Through (Commercial Lease) (Pro-Landlord) (CA)”
- Pro-tenant | “Proposition 13 Real Property Tax Reassessment Protection (Commercial Lease) (Pro-Tenant) (CA)”
Each side of the table has a published starting point. A tenant-side clause can carve a post-sale reassessment increase out of the tenant’s tax obligation, cap how much of it passes through, or delay the pass-through for a stated period after the transfer.
So read the lease, not the label. Then underwrite whichever answer the lease gives you:
- If the increase does pass through | the tenant’s total occupancy cost rises the day you close, through no action of theirs. At renewal that tenant is comparing a now-higher all-in cost against alternatives, which is a renewal risk you created at closing rather than one you inherited
- If it is capped, delayed or excluded | the increase lands on you, and your actual yield is lower than the offering memorandum implies. That gap can be larger than the difference between two cap rates you were comparing
- Either way | the post-sale tax bill belongs in your model before you sign, not after. Which side of the table it lands on is a question for the lease document and your attorney, not for the letters NNN
Confirm the specific parcel’s numbers with the Sacramento County Assessor, and confirm the lease language with your own attorney and tax professional.
The 35-year lease rule, and why a sale is not the only trigger
Most buyers have never heard of this one. Under California Revenue and Taxation Code section 61(c) and Property Tax Rule 462.100, a long lease can itself be a change in ownership, with no sale involved.
Three separate events trip it:
- Creating a leasehold interest in taxable real property for a term of 35 years or more, including renewal options
- Terminating a leasehold interest that had an original term of 35 years or more, including renewal options
- Transferring a leasehold interest with a remaining term of 35 years or more, including renewal options. That covers an assignment or a sublease
What that means in practice:
- Written options count toward the 35 years. A 20-year term with three 5-year options is 35 years, and it trips the rule even though the stated term is 20
- This is why long ground leases are often written at 34 years and 11 months, all options included. Practitioners structure right up to the line on purpose
- Only the leased premises is reappraised, not the whole property. Re-leasing one pad in a center does not reassess the center
- It can fire when your tenant sells its business. If a NNN tenant assigns a leasehold with 35 or more years left, options included, that assignment is a change in ownership as to the premises
- It also cuts the other way when you buy. Under section 61(c)(1)(D), selling the landlord’s interest is a change in ownership for the portion subject to a lease with less than 35 years remaining, options included. Where a lease has 35 or more years left, the sale of the landlord’s interest does not reassess that portion
If you are buying a NNN asset with a very long lease, or one with a stack of extension options, ask where the total term sits against 35 years before you model the tax line. This is general information, not tax or legal advice. Confirm with your attorney and your CPA.
NNN as a 1031 replacement property
A common reason a Sacramento owner ends up in a NNN deal is a 1031 exchange out of active management.
What the IRS actually requires. Under the Tax Cuts and Jobs Act, Section 1031 applies only to exchanges of real property. Personal and intangible property no longer qualify. Per the Form 8824 instructions, replacement property must be identified in writing no later than 45 days after transferring the relinquished property, and must be received by the earlier of the 180th day after that transfer or the due date, including extensions, of the return for that year.
Why NNN is the common landing spot. It ends active management. Long lease, credit tenant, tenant carrying the operating cost, no late-night calls.
Why the clock is the risk. Forty-five days is short. Buyers who start looking after closing routinely end up identifying whatever is available rather than what underwrites. The work happens before the relinquished property closes, not after.
More on the exchange mechanics: 1031 Exchange Strategy | thinking about the exit side first: Selling a Rental Property
How to underwrite a NNN deal before you commit
The cap rate is the last thing to look at, not the first.
Tenant credit
A 6 percent cap rate on a national credit tenant and a 6 percent cap rate on an unrated local operator are not the same investment. The stronger tenant is less likely to default or vacate, so the same headline yield carries different risk.
The cap rate is telling you what the market thinks of the tenant. Listen to it.
Remaining lease term
Years left is the difference between an income stream and a vacancy problem on a timer. A short remaining term means you are underwriting a re-lease, whether you meant to or not.
Escalation structure
Fixed percentage bumps, CPI-linked increases, or flat. Flat rent across a fifteen-year term is a real yield decline every year of it.
Concentration
Your entire income depends on one tenant. If they leave at expiration or default before it, the property goes from fully leased to fully vacant in one event. There is no partial occupancy to cushion it.
The carve-outs
Roof. Structure. HVAC replacement. Parking lot. Whatever the lease leaves with the landlord is a reserve you fund out of the yield you thought you were buying.
The tax clause
Separate from the carve-outs, and separate from the cap rate. Find the paragraph that says what happens to real property taxes on a change in ownership, and read it before you assume the tenant absorbs a reassessment.
Who can help you buy a NNN property in Sacramento
Matt Bingaman is a Commercial Advisor with Commercial Land & Luxury, a licensed California real estate salesperson, DRE #02139034, brokered by eXp Commercial.
Commercial real estate is the focus of this practice.
- Markets | Sacramento | Roseville | Folsom | El Dorado Hills | Placerville | El Dorado County
- Nationwide sourcing | through the eXp Commercial network, which matters when a 45-day identification window will not be satisfied by local inventory alone
- The work | sourcing | tenant credit review | lease abstraction | carve-out review | escalation analysis | the post-sale property tax picture before you commit
Market pages: Roseville, Rocklin & Lincoln | Folsom 1031 Exchange | Roseville 1031 Exchange
Related services: Commercial Investment Sales | 1031 Exchange Strategy
Background reading: What Is a NNN Lease and Why Do Real Estate Investors Love Them
Common questions about NNN leases in Sacramento
What is a NNN lease?
A triple net lease is a commercial lease where the tenant pays base rent plus three additional cost categories: property taxes, insurance, and maintenance. Cornell Law School defines it as a lease where the lessee pays rent and utilities as well as insurance, maintenance, and taxes. The owner collects rent and carries almost none of the operating cost.
Who can help me buy a NNN property in Sacramento?
Matt Bingaman, Commercial Advisor with Commercial Land & Luxury, a licensed California real estate salesperson, DRE #02139034, brokered by eXp Commercial. He works commercial only across Sacramento, Roseville, Folsom, El Dorado Hills and Placerville, and sources nationwide through the eXp Commercial network for 1031 buyers who cannot satisfy a 45-day identification window locally. Call or text (916) 513-0217.
What cap rate should I expect on a NNN deal in 2026?
The Boulder Group’s Q2 2026 net lease research reports overall single-tenant net lease cap rates at 6.82 percent, retail at 6.60 percent, industrial at 7.25 percent, and office at 7.90 percent. Those are national single-tenant benchmarks. For Sacramento, Kidder Mathews reports an average retail cap rate of 6.7 percent in Q3 2026 across all retail sales, not only NNN. Actual pricing moves with tenant credit, remaining lease term and escalation structure.
Is a NNN lease the same as an absolute NNN lease?
No, and the difference is the roof. Many leases marketed as NNN still leave roof, structure and major capital expenditures with the landlord. An absolute net lease shifts every cost, structural and capital items included, to the tenant. Read the carve-outs before you underwrite the yield.
How long do NNN leases usually run?
Long term. Cornell Law School describes triple net leases as most commonly 10 or 15 years, and sometimes much longer. CLA (CliftonLarsonAllen) puts the common span at 10 to 20 years with scheduled rent increases, which are usually fixed annual bumps or tied to CPI.
What is the main risk in a NNN investment?
Concentration. Your entire income depends on one tenant. If that tenant defaults or does not renew, the property moves from fully leased to fully vacant in a single event, with no partial occupancy to cushion it. This is why tenant credit and remaining lease term matter more than the headline cap rate.
How does California property tax affect a NNN purchase?
Under Proposition 13, the Sacramento County Assessor states the rate is fixed at 1 percent of assessed value plus any voter-approved assessment bonds, with annual increases capped at the lesser of California CPI or 2 percent, and reappraises property on a change in ownership. A sale is generally a change in ownership, so the assessment resets to your purchase price. Who absorbs that increase is negotiated, not automatic. Thomson Reuters Practical Law publishes both a pro-landlord Proposition 13 pass-through clause and a pro-tenant Proposition 13 protection clause for California commercial leases, which is direct evidence the point is bargained rather than settled by the letters NNN. California Revenue and Taxation Code section 61(c) adds a second trigger: creating, terminating or transferring a lease of 35 years or more, renewal options included, is itself a change in ownership. Read the lease and confirm with your attorney and your CPA. This is general information, not tax or legal advice.
Can I 1031 exchange into a NNN property?
Yes, if it is real property. Under the Tax Cuts and Jobs Act, Section 1031 applies only to exchanges of real property. Per the Form 8824 instructions, replacement property must be identified in writing no later than 45 days after you transfer the relinquished property, and received by the earlier of the 180th day after that transfer or the due date, including extensions, of your return for that year. This is general information, not tax advice. Confirm your specific situation with your CPA or qualified intermediary.
Next step
Looking at NNN as a 1031 replacement, or as a passive hold to get out of active management?
- Call or text | (916) 513-0217
- Book 15 minutes | calendly.com/bingamanrealty/15-min-consultation
- Email | matt@cll-cre.com
Matt Bingaman | Commercial Advisor, Commercial Land & Luxury
Licensed California real estate salesperson | CA DRE #02139034 | eXp Commercial
Disclosure
This page is general information about commercial real estate and is not tax, legal or investment advice. Matt Bingaman is not a CPA and not an attorney. Property tax treatment, including who bears a Proposition 13 reassessment increase, 1031 exchange eligibility and lease obligations depend on facts specific to your situation, your property and your lease document. Confirm your position with your CPA, your attorney and, for exchanges, a qualified intermediary before acting. Market figures cited are as of the dates and sources named on this page and change quarterly. Kidder Mathews figures are Kidder Mathews research, data source CoStar.