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Ground Lease Definition
A long-term lease of land in which the tenant will erect improvements at its own expense. Not a desirable arrangement from the tenant's point of view, but sometimes the only way to gain access to extremely valuable real estate in an excellent location. The owner may be willing to sell, or the owner may have received the property by gift or deed (such as a church or university) and be prohibited from selling for some period of time. At the end of the lease term, the improvements become the property of the landowner.
Source: The Complete Real Estate Encyclopedia (New York, NY: McGraw-Hill, 2007)
Ground Lease Basics
What Is a Ground Lease? (The Motley Fool, Mar. 26, 2026)
“As the name implies, a ground lease only involves leasing the ground -- not any buildings. A ground lease involves undeveloped commercial land that is leased to tenants, who then have the rights to develop and use the property for the duration of the lease.”
Ground Lease in Commercial Real Estate (Janover, Feb. 19, 2023)
Ground leases aren’t for everyone; they’re especially ill-suited for small businesses, start-ups, and commercial property investors who wish to flip their property within in a reasonable time-frame.
Ground Lease Fundamentals (CCIM)
“Want to know what ground leases are, how they are used in the commercial real estate industry, and how to successfully navigate a ground lease transaction? That's what you'll learn in this interactive course, Ground Lease Fundamentals. Explore the difference between a subordinated and unsubordinated ground lease; how ground leases can serve as low-cost, long-term sources of capital; and the importance of working with a knowledgeable ground lease attorney when involved in this type of transaction. You'll also learn how to evaluate the differences between the development of an income-producing building on land that the developer purchases and the development of the same building on land that is ground leased.”
What is a Ground Lease Agreement? (Indiana Commerical Board of REALTORS®)
“Ground lease agreements make up a sizable portion of commercial real estate transactions, especially in the retail sector. A ground lease is simply a long-term lease on land. The tenant is allowed to implement improvements on the land without holding ownership. While most associated the retail industry, ground lease agreements can apply to any type of property, including hotels, office, industrial, storage, healthcare facilities, and residential apartment buildings. Ground leases came about due to the unwillingness of landowners to sell valuable parcels of land. Retailers and other potential lessees were interested in the potential of these sites, without wanting to become burdened with maintaining ownership. However, despite the mutually beneficial framework, negotiation for ground leases can be complex, due to many possible variables involved. Ground leases are not for the faint of heart; however with the right team they can provide opportunity for great returns.”
Ground Lease News & Trends
Steep Land Lease Increases Could Be a Nasty Shock for Co-ops (Cooperator News, Mar. 1, 2024)
Shareholders in ground lease co-ops should be vigilant about their future. Kicking the can down the road is not a strategy for survival. Review your ground lease and prepare for the future, which might involve a buyout of that lease now.
Expiring Ground Leases Are the Ticking Time Bombs Beneath the Skyline of Any Major U.S. City (Fortune, Feb. 22, 2023) E
Most importantly, building owners need to avoid sleepwalking into a scenario where there’s only a decade or two left on the ground lease. Whenever I see disputes over ground leases that are entering their last few years of the lease term, I shake my head and wonder how the tenants could have let things go unaddressed so long, allowing the power to shift strongly in favor of the landlord. With ground leases typically lasting 50 to 99 years, building owner tenants should be getting clear on their goals and negotiating with landlords no later than 20 or 30 years before the expiration date.
The Ground Lease Dilemma – Affordability Engine or Ticking Time Bomb? (realtor.com, Apr. 22, 2026)
“The ground lease may be the real estate industry's "break glass in case of emergency" tool. The arrangement works by separating a structure from the dirt underneath it—cutting the costs for the developer and the eventual resident. Though this decoupling creates a much-needed entry point to an impossible market, it also creates a unique brand of vulnerability—one where the most valuable part of a home is the one part the homeowner doesn't actually own. As affordable housing advocates and others revisit the tool, it’s important to understand when it can be a true mechanism for affordability—and when it risks derailing ownership entirely.”
Valuing & Financing Ground Leases
Ground Lease Valuation Model (A.CRE, Jul. 2025)
All sections of the Ground Lease Valuation Model are contained on one worksheet. This is intentional to allow you to insert this model into your own property-level model to make it easier to add a ground lease component to your analysis.
The Problem of Ground Leases (Appraisal Journal, Oct. 1, 2023) E
Recently, there have been some dramatic reappraisals of Manhattan ground-leased properties that have upset traditional ground lease markets. As a result, many leasehold mortgage lenders, which are essential to the financing of ground-leased properties, are avoiding leases with reappraisal clauses. This is affecting the negotiation, financing, and economics of projects in New York and throughout the country and threatens to bring an end to traditional ground lease practice.
How to Value Ground Leases Using Capitalization Rates (The Fractional Analyst, Jul. 18, 2025)
“Ground leases are long-term agreements where tenants lease land to develop it, often lasting 30-99 years. Valuing these leases accurately is essential for investors and landowners, as they provide a consistent income stream and access to prime locations without the high cost of land acquisition. The primary method for valuation is the direct capitalization approach, which uses a capitalization rate (cap rate) to estimate the property's value. The direct capitalization method is a straightforward way to value ground leases, but accurate cap rate selection and adjustments for lease features are critical for reliable results.”
eBooks & Other Resources
eBooks.realtor.org
The following eBooks and digital audiobooks are available to NAR members:
The Art of Commercial Real Estate Leasing: How to Lease a Commercial Building and Keep It Leased (eBook)
Commercial Mortgages 101: Everything You Need to Know to Create a Winning Loan Request Package (eBook)
Commercial Real Estate Investing: 12 Easy Steps to Getting Started (eBook)
Commercial Real Estate Investing: A Creative Guide to Successfully Making Money (eBook)
The Complete Guide to Real Estate Finance for Investment Properties: How to Analyze Any Single-Family, Multifamily, or Commercial Property (eBook)
Commercial Real Estate Investment (eBook)
Complete Book of Real Estate Leases (eBook)
Getting Started as a Commercial Mortgage Broker: How to Get to a Six-Figure Salary in 12 Months (eBook)
Good Commercial Sense (eBook)
The Leasing Process (eBook)
Negotiating Commercial Leases & Renewals for Dummies (eBook)
Wealth Opportunities in Commercial Real Estate (eBook)
Books, Videos, Research Reports
As a member benefit, the following resources and more are available for loan through the NAR Library. Items will be mailed directly to you or made available for pickup at the REALTOR® Building in Chicago.
Commercial Lease Law Answer Book (New York, NY: Vendome Group, 2008) KF 593 C6
Lease Guide: Guide to Writing a Commercial Real Estate Lease Including Green Lease Language (Washington, D.C.: BOMA International, 2008) HD 1384 T23
The Leasing Process: Landlord and Tenant Perspectives (Chicago, IL: Institute of Real Estate Management, 2008) HD 1394 M89
Managing and Leasing Commercial Properties (New York, NY: Wiley, 2007) HD 1394 AL2ma
Negotiating Commercial Real Estate Leases (Chicago, IL: Dearborn, 2001) HD 1384 R22
Negotiate Your Commercial Lease (Bellingham, WA: Self-Counsel Press, 1998) HD 1384 W66
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