When you are looking for new commercial, industrial or retail premises it is easy to overlook some of the costs involved in entering into a lease for commercial premises. That is particularly the case if you are relocating from existing premises that you lease. Leasing commercial premises can be expensive at the best of times but there are usually other costs that need to be considered and budgeted for before you commit to a new commercial lease.

Some of those are:

  • Rent: The most obvious commercial property cost is the rent that you will have to pay, and the advertising for the properties will often display the asking price. Be aware that any price displayed will almost certainly be exclusive of GST and you will need to pay an additional amount for GST, which may impact on your cashflow even if you will be able to claim that GST as an input tax credit.

    Also be aware that just like when buying a property the displayed price may not reflect the best price and you can often negotiate a substantial rental abatement, rent free period, contribution towards your fitout or other incentive from the landlord but you will need to negotiate that upfront. Rent will also increase annually during the term of the lease
  • Outgoings: Most commercial leases do not include outgoings in the rent they quote and they are additional charges over and above the rent and will also increase annually. The outgoings can be substantial
  • Car parking fees: In many of the major commercial areas car parking is an additional cost over the rent and is quoted on a rate per car space per month. You will also usually be asked to pay any car parking levy that exists, which can also be significant
  • Repair and maintenance costs: You will take on responsibility for the premises and the ongoing repair and maintenance of the commercial property.
  • Gas, electricity, telephones, internet and other services: You will need to arrange for those services or to pay for those services
  • Cleaning and rubbish removal: If you are leasing in a large building the landlord is likely to arrange for cleaning at your cost, otherwise you will need to do so
  • Costs of moving: This includes the physical costs of engaging removalists as well as the less obvious costs related to changes to your location including changes to stationary and relocation of post and phone services
  • Establishment costs: This includes physical costs of setting up in the new offices such as the cost of any work required, cabling, IT configuration and signage
  • Legal costs: This is the cost to you of having your commercial lease and other documentation such as an agreement for lease, car parking licence, storage licence, incentive deed or other documentation, and will often include at least a component towards the landlord's legal costs as well
  • Make good: If you are relocating from existing premises then you clearly need to budget for the make good you are likely to need to carry out in the existing premises. It is extremely important that you also factor in the make good you are being asked to carry out in your new Premises, as some leases can require you to improve the Premises
  • Break costs: If you are relocating from existing premises you may have break costs involved in an existing lease and you may also have break costs in relation to some of the services provided at those premises such as gas or electricity. It is important to note that if you have committed to a commercial lease for an extended term and you end early there is no automatic right for you to cease payments under your existing lease.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.