Triple-net leases (NNN), once the darling of commercial real estate investors and landlords, are under increasing pressure in Florida’s current economic climate. Traditionally attractive for their pass-through of expenses to tenants, NNN leases are being reexamined as property insurance costs skyrocket—particularly in hurricane-prone regions like South Florida.
Understanding NNN Leases
In a triple-net lease, the tenant agrees to pay all property expenses—including real estate taxes, insurance, and maintenance—on top of base rent. This structure minimizes risk for landlords and offers tenants predictable control over operating costs.
But that predictability is fading.
What’s Changing in 2025?
- Insurance premiums are surging: Florida commercial property insurance costs have doubled or tripled in some areas, especially near the coast. Tenants are pushing back.
- Natural disaster risk is increasing: More frequent storms and flood events are changing how underwriters assess risk.
- Tenants are demanding caps or cost-sharing: Many now negotiate limits on their insurance obligations within NNN agreements.
- Lenders are wary of underperforming assets: Higher CAM charges make some retail and office properties less attractive to national tenants.
How Landlords Are Responding
- Switching to modified gross leases to absorb some volatility
- Offering insurance carveouts or including maximum contribution clauses
- Pursuing property upgrades to qualify for reduced premiums
- Rebalancing rent vs. expenses to keep total occupancy costs competitive
Legal & Strategic Considerations
Landlords must carefully update lease templates to reflect realistic cost structures. Legal counsel should ensure CAM and insurance provisions are clearly defined, enforceable, and flexible enough to accommodate rising costs without breaching the agreement or triggering tenant defaults.
As Florida’s insurance landscape shifts, so too must the legal and financial models underpinning commercial real estate deals.
