Abstract
Because landlords assume all of the operating expense risk, rents for gross leases exceed those for net leases. The markup for gross leases varies between properties and across markets. A matching procedure is applied to measure the services markup as the percentage difference between the actual rent on a gross lease relative to the actual rent on a net lease in an office building with similar characteristics. Using a set of 3,548 office gross lease observations in six major U.S. office markets, we estimate the determinants of the gross rent markup and find statistically significant evidence supporting the posited effects.
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