Leasing is at the very heart of the commercial real estate income, along with property flipping. With leases, like the industrial gross lease, you have options. How much should I charge for rent? Indeed, how long will the lease last? Furthermore, what form of lease should I utilize? In this article, we’ll cover:

  • What is an Industrial Gross Lease?
  • How to Structure an Industrial Modified Gross Lease
  • An Example of an Industrial Gross Lease
  • Rent Calculator
  • How Assets America Can Help
  • Frequently Asked Questions

Of course, if you’ve read our article, Modified Gross Lease — Everything You Need to Know (+ Calculator), you are well-prepared.

What is an Industrial Gross Lease?

An industrial gross lease is a modified gross lease that landlords use for multi-tenant industrial buildings. It provides for tenants to pay their share of certain costs, such as utilities and common area expenses. Tenants also pay for a share of services that the landlord provides.

The landlord is typically responsible for property taxes and insurance on the industrial building. To be sure, the lease will specify exactly which services the landlord will provide.

Truthfully, an industrial gross lease combines features of a modified gross lease and a triple-net lease. For example, it’s like a net lease because the tenant picks up the cost for some property expenses.

However it also resembles a modified gross lease, as the landlord provides some services in the tenants’ rents. Specifically, these may include insurance, exterior maintenance and property taxes.

How Assets America® Can Help

Assets America® can arrange financing for commercial projects starting at $20 million, with no upper limit.  We can help finance the purchase or renovation of an industrial or warehouse property through our network of private investors and banks. For the best in commercial real estate financing, Assets America® is the smart choice.  We invite you to contact us today at 206-622-3000 for more information about our complete financial services, or simply fill out the below form and receive a prompt response!

Apply For Financing


How to Structure an IG Lease

The structure of an IG lease references special terms like base year. Clearly, landlords should understand how they want to structure their IG leases because it could affect industrial building financing.

Base Year

First, to understand the structure of an industrial gross lease, you must understand the concept of base year. The base year refers to the first-year costs for operating expenses. That is, it represents a ceiling on the expenses the landlord will pay in subsequent years.

In other words, tenants pay the excess over the ceiling amounts for operating expenses starting in Year 2 of the lease. Generally, a base year extends over a calendar year or the first 12 months of the tenant’s lease. Typically, costs that are subject to a base year cap might include taxes, insurance, utilities, and maintenance.

Common Areas

As its name implies, a building’s common areas serve multiple tenants. Obviously, they include the lobby, elevators, vending machine areas, and so forth.

Doubtlessly, an industrial building might have common areas shared by tenants, such as locker rooms or a security office. Normally, an industrial gross lease specifies that the tenants share the maintenance and utility costs of the common areas.

Tenant Expenses

The tenant will typically pay 20% to 25% added costs for services not included in the rent. Tenants may pay for janitorial services, garbage pickup, etc., depending on the terms of the lease.

The landlord pays for all other expenses. Naturally, if you use a base year, the tenants will pay for specified expenses that exceed the first-year cap.

For example, rent in the first year might cover insurance costs and property taxes. Subsequently, tenants share any increases in these costs in the form of additional rent. Frequently, a multi-tenant industrial building will have separate metering for each tenant, and tenants pay their own utility bills.

On the other hand, a building occasionally has single metering. In this case, the landlord will prorate utility costs using some figure, such as square feet or monthly rent.

IG Rent

The term “industrial gross rent” often appears with IG lease. It is a rent concept particularly useful for industrial multi-tenant properties. Importantly, IG rent implies that tenants share some of the building’s operating expenses.

In other words, the rent includes those shared expenses, and the landlord separately covers the non-shared expenses. Invariably, IG rent will be higher than triple-net rent. That’s because the landlord pays some expenses that it wouldn’t under an NNN lease.

Industrial Gross Lease Example

In this example, imagine you decide to rent out an industrial building instead adaptively reusing it. Honestly, you reach the decision by considering the property’s highest and best use.

The IG lease you use quotes rent for an industrial gross lease at $12 per square foot per year. That’s $1 per square foot/month. Next, a new tenant decides to lease 5,000 square feet, with an annual rent of $60,000. Conveniently, two other tenants occupy the industrial building, each also with 5,000 square feet.

Importantly, individual meters allow tenants to pay their own utility bills. Now, the landlord agrees to pay for insurance and taxes of $10,000 per year. Therefore, after Year One, the tenants will pay any insurance and tax costs that exceed $10,000 for the year.

Logically, at the end of Year 2, the costs for taxes and insurance equal $12,100. That’s $2,100 above the base-year cap, an overage that tenants share. Thus, each tenant receives a rent increase equal to $700 a year ($2,100 / 3). Specifically, this covers the increase in insurance and tax expense.

Inevitably, this exercise repeats at the end of each year. The industrial gross lease discloses all these provisions, lest a tenant plead ignorance of their financial responsibilities.

In this case, the tenant had to initial the lease clauses dealing with base-year arrangements. This way, the landlord does not have to entertain complaints about tenants being “blindsided” by rent increases.

Rent Calculator

This commercial lease calculator with advanced mode allows tenants to compute base rent and operational expenses. Simply, base rent is rate times area.

Of course, operational expenses depend on the lease terms. This is useful for an industrial gross lease, since only certain expenses belong to tenants.

Commercial Lease Calculator

Why Choose an IG Lease?

Landlords might prefer an industrial gross lease because they want control over certain facets of the property. Specifically, those facets are activities that the landlord doesn’t want to delegate to tenants.

For example, landlords might find they get better results by maintaining common areas themselves. Through IG rent, landlords get tenants to help them cover certain costs, thereby improving returns and minimizing risk.

Using an industrial gross lease may also make it easier to finance industrial buildings. To learn more about financing industrial property, see Industrial Areas — Step-by-Step Financing Guide.

IG Lease FAQs

What are the different types of leases?

Gross leases include full service, modified, and industrial gross. You can also choose a single-, double-, or triple-net lease. See our Net Leases (Single, Double, Triple) | Complete Guide.

Additionally, check out our article on Ground Lease – Everything You Need to Know (+ Calculator).

What are the advantages of an industrial gross lease?

An industrial gross lease gives landlords some protection against rising expenses through the use of base-year caps. Therefore, landlords can pass certain expenses to tenants and keep others. Tenants benefit from the services that the landlord provides.

What does the landlord pay in an IG lease?

The lease language will specify what the landlord pays. For example, the landlord might pay for utilities, taxes, and insurance. Often, tenants pay a portion of expenses that exceed the base-year cap.

Are industrial gross leases a good investment?

Yes, because they protect against expense increases over time. Of course, the landlord can decide which expenses to pay and which to pass through to the tenants. Clearly, this gives landlords better control over their expenses.

What are good alternatives to an industrial gross lease?

A modified gross lease is virtually the same as the industrial modified gross lease. A triple-net lease is also a good choice, because tenants are responsible for insurance, taxes and common area maintenance.


Eric D.
Pleasure to work with and extremely knowledgeable

Ronny was a pleasure to work with and is extremely knowledgeable. His hard work was never ending until the job was done. They handled a complex lease and guided us through entire process, including the paperwork. Not to mention a below market lease rate and more than all the features we needed in a site. We later used Assets America for a unique equipment financing deal where once again Ronny and team exceeded our expectations and our timeline. Thank you to Assets America for your highly professional service!

exp MFGroup
Great experience with Assets America

Great experience with Assets America. Fast turn around. Had a lender in place in 30 minutes looking to do the deal. Totally amazing. Highly recommend them to anyone looking for financing. Ronny is fantastic. Give them a call if the deal makes sense they can get it funded. Referring all our clients.

William P.
Assets America guided us every step of the way

Assets America guided us every step of the way in finding and leasing our large industrial building with attached offices. They handled all of the complex lease negotiations and contractual paperwork. Ultimately, we received exactly the space we needed along with a lower than market per square foot pricing, lease length and end of term options we requested. In addition to the real estate lease, Assets America utilized their decades-long financial expertise to negotiate fantastic rates and terms on our large and very unique multimillion dollar equipment purchase/lease. We were thankful for how promptly and consistently they kept us informed and up to date on each step of our journey. They were always available to answer each and every one of our questions. Overall, they provided my team with a fantastic and highly professional service!

Bob B.
The company is very capable, I would recommend Assets America

Assets America was responsible for arranging financing for two of my multi million dollar commercial projects. At the time of financing, it was extremely difficult to obtain bank financing for commercial real estate. Not only was Assets America successful, they were able to obtain an interest rate lower than going rates. The company is very capable, I would recommend Assets America to any company requiring commercial financing.

Ricardo L.
Assets America was incredibly helpful and professional

Assets America was incredibly helpful and professional in assisting us in purchasing our property. It was great to have such knowledgeable and super-experienced, licensed pros in our corner, pros upon which we could fully rely. They helped and successfully guided us to beat out 9 other competing offers! They were excellent at communicating with us at all times and they were extremely responsive. Having them on our team meant that we could always receive truthful, timely and accurate answers to our questions. We would most definitely utilize their services again and again for all of our real estate needs.

Assets America is a great company to work with

Assets America is a great company to work with. No hassles. Recommend them to everyone. Professional, fast response time and definitely gets the job done.

DAC Team
Great experience

Ronny at Assets America has been invaluable to us and definitely is tops in his field. Great experience. Would refer them to all our business associates.

MF Group
We were very pleased with Assets America’s expertise

We were very pleased with Assets America’s expertise and prompt response to our inquiry. They were very straight forward with us and helped a great deal. We referred them to all our business associates.

Manny C.
Worked with this company for decades

I’ve worked with this company for decades. They are reputable, knowledgeable, and ethical with proven results. I highly recommend them to anyone needing commercial financing.

David B.
Top-notch professional

Ronny was incredibly adept and responsive – top-notch professional who arranged impressive term sheets.

Monte M.
Assets America helped us survive a very difficult time

Assets America helped us survive a very difficult time and we most definitely give them 5 stars!

Brent G.
Gave me direction to go

Ronny was very friendly and though we were unable to make something happen at the moment he gave me some direction to go.

Allan E.
Highly recommend them for any type of commercial financing

My business partner and I were looking to purchase a retail shopping center in southern California.  We sought out the services of Ronny, CFO of Assets America.  Ronny found us several commercial properties which met our desired needs.  We chose the property we liked best, and Ronny went to work. He negotiated very aggressively on our behalf. We came to terms with the Seller, entered into a purchase agreement and opened escrow.  Additionally, we needed 80 percent financing on our multimillion-dollar purchase.  Assets America also handled the commercial loan for us.  They were our One-Stop-Shop. They obtained fantastic, low, fixed rate insurance money for us.  So, Assets America handled both the sale and the loan for us and successfully closed our escrow within the time frame stated in the purchase agreement.  Ronny did and performed exactly as he said he would. Ronny and his company are true professionals.  In this day and age, it’s especially rare and wonderful to work with a person who actually does what he says he will do.  We recommend them to anyone needing any type of commercial real estate transaction and we further highly recommend them for any type of commercial financing.  They were diligent and forthright on both accounts and brought our deal to a successful closing.