---
title: "Commercial Real Estate 101: Cap Rates, NNN, and Tenant Mix"
canonical: https://www.ondorealestate.com/blog/commercial-real-estate-101-tenant-mix/
---

# Commercial Real Estate 101: Cap Rates, NNN, and Tenant Mix

The three levers that define CRE value.

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Educational

ONDO Team·Published December 10, 2025·2 min read

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On this page

- [Cap Rates (Definition + Use)](#cap-rates-definition-use)
- [Lease Structures](#lease-structures)
- [Tenant Mix (Risk and Resilience)](#tenant-mix-risk-and-resilience)
- [Vacancy and Rollover Risk](#vacancy-and-rollover-risk)
- [Developer’s Angle](#developers-angle)
- [Utah/Regional Nuance](#utah-regional-nuance)
- [Takeaway](#takeaway)
Commercial real estate looks complex until you anchor on three ideas: cap rates, lease structure, and tenant mix. Once you see those levers, underwriting gets repeatable.

## Cap Rates (Definition + Use)

- **Definition**: NOI / Purchase Price.
- **Use**: A shorthand for yield; also a risk proxy by market/asset quality.
- **Move**: Grow NOI or buy at a better multiple; small NOI changes swing value.

## Lease Structures

- **Gross**: landlord pays expenses; simpler, more risk on owner.
- **NNN**: tenant reimburses taxes/insurance/CAM; steadier NOI but watch CAM caps.
- **Modified Gross**: splits the difference; read the expense stops carefully.

## Tenant Mix (Risk and Resilience)

- **Diversify cashflow**: limit exposure to any one tenant unless credit is stellar.
- **Complementary uses**: co-tenants that drive traffic to each other reduce vacancy risk.
- **Lease rollover map**: avoid multiple big expirations in the same year.

## Vacancy and Rollover Risk

Value swings with downtime. Underwrite realistic downtime and TI/LC (tenant improvement + leasing commissions) by tenant type.

## Developer’s Angle

- Model unit-level leases with expirations and option terms; visualize rollover by year.
- Track NNN recovery vs actuals; CAM caps can hide leakage.
- Scenario test: one anchor dark, two in-line vacants; does DSCR hold?

## Utah/Regional Nuance

Tech-heavy corridors (Lehi/Draper) can have higher rent PSF but also more exposure to sector swings. Balance with service/medical tenants that are sticky.

## Takeaway

CRE is three dials: cap rate, lease structure, and tenant mix. Map rollover, stress downtime, and mind CAM language. Everything else is detail.

On this page

- [Cap Rates (Definition + Use)](#cap-rates-definition-use)
- [Lease Structures](#lease-structures)
- [Tenant Mix (Risk and Resilience)](#tenant-mix-risk-and-resilience)
- [Vacancy and Rollover Risk](#vacancy-and-rollover-risk)
- [Developer’s Angle](#developers-angle)
- [Utah/Regional Nuance](#utah-regional-nuance)
- [Takeaway](#takeaway)

## Keep going

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## What to do next

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