Industrial lease negotiations in Metro Vancouver inevitably involve discussions about triple-net structures and TMI—terms that significantly impact total occupancy costs but are frequently misunderstood. Whether you're a tenant evaluating a new space or a landlord structuring a lease, understanding how these components work together is essential for accurate budgeting and fair deal-making.
This guide breaks down triple-net lease mechanics as they apply specifically to Metro Vancouver industrial properties, with current cost ranges and practical considerations for both parties.
What Triple-Net Actually Means in Industrial Leasing
A triple-net lease (often abbreviated as NNN) is a structure where the tenant pays base rent plus three categories of additional costs: property taxes, building insurance, and operating expenses (commonly called common area maintenance or CAM). In Metro Vancouver's industrial market, virtually all institutional-quality leases follow this structure.
The term "net" refers to what the landlord receives—rent that is net of these operating expenses. Under a true triple-net arrangement, the landlord collects base rent as relatively predictable income while passing through the variable costs of property ownership to tenants.
In practice, Metro Vancouver industrial leases typically bundle these three cost categories into a single line item called TMI: Taxes, Maintenance, and Insurance. This simplifies monthly billing while maintaining the triple-net principle that tenants bear operating costs proportionate to their occupied space.
It's worth noting that "triple-net" exists on a spectrum. Some leases are structured as absolute triple-net, where tenants are responsible for literally all costs including structural repairs and roof replacement. Others carve out certain capital expenditures as landlord responsibilities. The specific allocation should be clearly defined in each lease.
Current TMI Ranges Across Metro Vancouver Submarkets
TMI rates vary significantly across Metro Vancouver based on property age, building specifications, and municipal tax rates. As of mid-2026, typical TMI ranges for multi-tenant industrial buildings are:
- Vancouver proper: $6.50 to $9.00 PSF annually, reflecting higher property tax assessments and older building stock requiring more maintenance
- Burnaby: $5.75 to $7.50 PSF annually, with newer buildings in the Big Bend area trending toward the lower end
- Richmond: $5.50 to $7.25 PSF annually, though properties in flood-prone areas may carry higher insurance premiums
- Surrey (Newton, Port Kells): $4.75 to $6.50 PSF annually, benefiting from newer building stock and lower land assessments
- Delta (Tilbury, Annacis Island): $5.00 to $6.75 PSF annually, with variation based on building class and proximity to port infrastructure
- Langley and Campbell Heights: $4.50 to $6.00 PSF annually, among the most competitive in the region due to newer construction and lower municipal rates
These figures represent typical ranges for multi-tenant strata or leasehold buildings. Single-tenant freestanding buildings often show different profiles, particularly for insurance and maintenance components.
Breaking Down the TMI Components
Property Taxes typically represent 50% to 65% of total TMI in Metro Vancouver. Industrial properties are assessed based on market value, and the region's sustained demand has pushed assessments upward over the past several years. Municipal tax rates vary considerably—Vancouver's combined rate exceeds those in Surrey or Langley by a meaningful margin, which flows directly through to tenant costs.
Building Insurance generally accounts for 10% to 15% of TMI. This covers the building envelope, common areas, and landlord liability. Tenants should note this is distinct from their own contents and liability coverage, which they must carry separately. Insurance costs have risen across the region since 2023, particularly for properties in areas with flood or seismic exposure.
Operating Expenses and Maintenance comprise the remaining 25% to 35%. This category includes common area utilities, landscaping, parking lot maintenance, garbage removal, building management fees, and reserves for repairs. In multi-tenant buildings, it also covers shared loading areas and any common HVAC systems.
Tenants should request a breakdown of the operating expense budget during lease negotiations. Understanding what's included—and what's excluded—prevents surprises during occupancy.
How TMI Is Calculated and Billed
In multi-tenant buildings, TMI is typically calculated on a proportionate share basis. If you lease 10,000 SF in a 100,000 SF building, you're generally responsible for 10% of the building's total operating costs. However, the specific calculation method matters.
Some leases use rentable square footage, which includes a gross-up factor for common areas. Others use a usable or net square footage basis. The difference can shift your proportionate share by several percentage points.
Most landlords bill TMI monthly based on an annual budget estimate, then reconcile actual costs against collected amounts at year-end. If actual costs exceed the estimate, tenants receive a supplemental invoice. If costs come in under budget, tenants receive a credit.
Sophisticated tenants should review year-end reconciliation statements carefully. Common issues include expenses that should be capitalized rather than expensed, costs that exceed market rates for comparable services, and expenses not contemplated in the lease. NAI Commercial's tenant representation practice regularly identifies reconciliation discrepancies during lease audits.
Negotiating TMI Provisions in Your Lease
While base rent typically receives the most negotiating attention, TMI terms significantly impact total occupancy costs over a lease term. Several provisions warrant careful review:
Expense caps limit annual increases in controllable operating expenses (excluding taxes and insurance, which landlords cannot control). A typical cap might limit increases to 3% to 5% annually over a base year. These protections become valuable if building management changes or maintenance philosophies shift.
Gross-up provisions allow landlords to calculate operating expenses as if the building were fully occupied. Without this provision, tenants in partially vacant buildings might see their proportionate share decrease—but they'd also bear the variable costs (utilities, cleaning) of vacant space. The gross-up provision is standard but should be limited to variable expenses only.
Capital expenditure treatment defines how major repairs and replacements are handled. Many leases amortize capital costs over their useful life, passing through only the annual amortization amount. Others exclude capital expenditures entirely from operating expenses. The distinction matters significantly for older buildings approaching major system replacements.
Audit rights give tenants the ability to review landlord expense records. This provision is standard in institutional leases but may be absent in smaller transactions. The right to audit, combined with the practical resources to exercise it, provides meaningful protection against billing errors.
Practical Considerations for Budgeting
When evaluating industrial space in Metro Vancouver, total occupancy cost—not just base rent—should drive comparisons. A building quoting $18.00 PSF base rent with $5.50 TMI costs less than one at $17.00 PSF with $7.50 TMI, though the base rent appears higher.
For budgeting purposes, tenants should assume TMI will increase annually, even with expense caps in place. Property tax increases have averaged 3% to 6% annually across Metro Vancouver over the past five years, and insurance markets remain firm. Building a 4% to 5% annual escalation assumption into occupancy cost projections provides a reasonable buffer.
Landlords and investors should recognize that TMI competitiveness affects leasing velocity and tenant retention. Buildings with transparent, well-managed operating budgets attract quality tenants who value predictability. The NAI Global network's research consistently shows that institutional tenants increasingly scrutinize total occupancy costs during site selection.
Understanding triple-net structures and TMI mechanics is fundamental to sound decision-making in Metro Vancouver's industrial market. Whether you're negotiating a new lease, renewing an existing term, or evaluating an investment acquisition, clarity on these costs ensures accurate underwriting and appropriate risk allocation between parties.