Abstract
The premium for the gross lease relative to the net lease is estimated using a large sample of leasing data for office properties in seven U.S. markets during 2011. After matching gross leases with net leases on propensity scores, analysis for the matched sample of 9,860 lease observations reports the gross lease premium estimated at 12.9%. The relative premium of a gross lease responds to property‐specific characteristics, including tenant size, property size and property class, and is increasing with operating expense expectations. Gross lease premiums are increased in low‐vacancy markets. The findings support theoretical predictions from the existing literature.
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