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
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.
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