A Guide to Outgoing Expenses in Commercial Office Leasing

When considering a commercial office lease in Brisbane, it’s essential to understand the various outgoings and costs beyond the base rent. These additional expenses can significantly impact your overall lease agreement and decision-making process.

This guide outlines the typical outgoings you may encounter when leasing office space, helping you navigate the commercial office leasing landscape in Brisbane with confidence.

What additional costs are incurred when leasing office space?

In addition to the base rent, commercial tenants should be aware of several other costs that may arise during the lease term. Understanding these outgoings is crucial for making informed decisions about your office leasing options.

Types of outgoing costs in a commercial lease

Increases in outgoings

Commercial leases often present rental rates as either “gross” (inclusive of building outgoings) or “net” (exclusive of building outgoings).

Here’s how they differ:

• Gross Lease: Under a gross lease, the tenant pays a fixed rent that is often presented as covering all building outgoings. However, it’s essential to understand that many landlords include a clause allowing them to recover any increase in outgoings at the end of each financial year. This means that what appears to be a straightforward gross lease may actually function as a ‘semi-gross’ lease, where the rent is subject to adjustments.
  • To determine these adjustments, landlords typically use the total commercial outgoings from the last full financial year prior to the lease commencement as a ‘base year.’ Any increases in outgoings beyond this base year are passed on to the tenants. The amount each tenant pays is calculated proportionally, based on the percentage of the building’s net lettable area (NLA) that they occupy.
  • For example, if you occupy 10% of a building’s total NLA, you would be responsible for 10% of any increase in outgoings beyond the base year.
  • During lease negotiations, landlords may provide a forecasted budget for the following year’s outgoings, giving you an idea of potential future costs. Alternatively, they might offer historical data from previous years to show what outgoings might have been if you had been a tenant during those periods.
  • While past figures aren’t guaranteed indicators of future costs, they can offer a useful guide for budgeting and decision-making.
  • By understanding how these adjustments work, tenants can better prepare for any future financial obligations under a gross lease, ensuring there are no surprises down the line.
• Net Lease: In a net lease, tenants pay their portion of outgoings separately from the base rent.
  • These outgoings are typically estimated for the year and reconciled at the end of the financial year.
  • If actual outgoings exceed estimates, tenants may need to cover the difference, or conversely, they may receive a refund if outgoings are lower than anticipated.

Cleaning costs

Cleaning is another significant outgoing for commercial tenants. In large office buildings, a designated cleaning company usually handles both tenancy and common area cleaning. The cost is often calculated on a per square meter basis, typically ranging from $13 to $18 per square meter, excluding GST.

For smaller office spaces, tenants may have the option to manage cleaning themselves.

Electricity usage

Electricity costs are generally billed separately and are based on individual tenancy usage.

Commercial buildings typically have separate metering for each tenancy, with charges billed monthly. Costs will vary depending on your specific usage and requirements.

After-hours air conditioning

Standard air conditioning is provided during designated building hours, but tenants may incur additional costs for after-hours air conditioning. These costs can vary widely depending on the building and are often charged in two-hour blocks.

Tenant directory signage

Many buildings charge a fee for adding your business name to tenant directory boards, both on your office floor and in the building’s lobby.

These costs can range from $100 to $150, excluding GST.

Tenant car parking signage

If your lease includes onsite parking, there may be a nominal fee to erect signage designating your business’s parking bays.

Access cards

Most landlords provide a set number of access cards at the start of your lease, typically at a ratio of 1 card per 10 square meters of office space. Additional cards may be available for purchase at varying costs depending on the building.

Condition report

When leasing a fitted-out office space, a Condition Report is usually required. This report documents the condition of the premises at the start of the lease and is used to ensure the space is returned in the same condition at the end of the lease, subject to fair wear and tear. Costs for this report are often shared between the landlord and tenant.