What Outgoing Costs Are Involved in a Commercial Lease?

When leasing office space in Brisbane, rent is only one part of the overall occupancy cost. In addition to base rent, commercial tenants are typically responsible for a range of building outgoings that can materially affect their leasing budget.

This article outlines the most common outgoings associated with commercial office leasing in Brisbane, explains how they are structured, and highlights why understanding these costs is critical when assessing office space for lease.

Understanding Commercial Lease Outgoings

Beyond rent, tenants should factor in additional costs that form part of a commercial lease. These outgoings are not always clearly understood at the outset, yet they can have a significant impact on cash flow and total occupancy costs over the life of the lease.

The outgoings outlined below are the most common across Brisbane commercial leases, however the structure and recoverability of these costs will ultimately depend on the terms negotiated with the landlord.

Increases in Outgoings

Your rental rate will typically be presented as either gross (inclusive of building outgoings) or net (exclusive of building outgoings).

Gross Lease

Under a gross lease, the tenant pays a fixed rent. However, landlords often retain the right to recover any increase in building outgoings at the end of each financial year – a clause commonly included in an Offer to Lease.

As a result, many gross leases are effectively semi-gross, even if presented otherwise.

The agent, via the property manager, can usually provide guidance on potential future increases. The calculation is straightforward:

• The total building outgoings from the last full financial year prior to lease commencement are used as the base year
• Any increase above this base is recovered from tenants proportionately, based on the percentage of Net Lettable Area (NLA) they occupy

If a landlord has a forecast budget for the following year’s outgoings, this can be shared during lease negotiations. Alternatively, historical data from previous years may be provided as an indicative guide. While past figures are not a guarantee of future costs, they are generally sufficient to give tenants comfort around likely increases.

Net Lease

If your rent is quoted as net of outgoings, you will typically pay estimated outgoings monthly based on a forward-looking annual budget.

At the end of the financial year, a reconciliation is undertaken. If actual costs exceed the estimate, the tenant will be required to pay the shortfall. If costs are lower than anticipated, a refund should be issued.

Cleaning Costs

Tenants are typically responsible for both tenancy cleaning and common area cleaning.

In established office buildings, cleaning is usually carried out by a single contracted provider appointed by the building owner. Tenants are required to maintain regular cleaning schedules to comply with building management rules.

Cleaning contracts are periodically tendered to ensure value for money and service quality. The property manager can provide indicative cleaning costs, often quoted on a $/sqm basis. As a guide, cleaning costs commonly range between $13/sqm and $18/sqm (ex GST).

In some cases, common area cleaning may already be incorporated into the quoted rental rate.

Tenants in smaller, low-rise office buildings may have the option to arrange their own cleaning, particularly where there are only a small number of occupants.

Electricity Usage

Most tenancies within established commercial office buildings are separately metered, with electricity charges billed monthly.

Electricity costs will vary depending on the nature of the business, hours of operation, and equipment usage.

After-Hours Air Conditioning

Landlords generally provide air conditioning during designated building hours for both tenancies and common areas. These hours should always be confirmed with the property manager.

Outside of standard building hours, tenants may request after-hours air conditioning, which is commonly charged in two-hour blocks. Costs vary significantly from building to building and should be clarified early in the leasing process.

Tenant Directory Signage

Tenants wishing to display their company name on building directory boards (both at ground level and on individual floors) are typically required to pay a signage fee.

Indicative costs are usually modest, often ranging from $100 to $150 (ex GST)

Tenant Car Parking Signage

If you lease permanent on-site car parking bays, there may be a nominal fee to install signage identifying the bays as allocated to your business.

Access Cards

At lease commencement, landlords generally provide an initial allocation of access cards at no cost. This is commonly issued on a ratio of approximately 1 card per 10sqm.

Any additional access cards required beyond this allocation are charged at a per-card rate, which varies by building.

Condition Report

Where a tenancy is leased in fitted condition, or where the landlord delivers a fit out, a Condition Report is typically required. This report documents the condition of the tenancy at handover.

Subject to fair wear and tear, the tenancy is generally required to be returned in this condition at lease expiry, unless otherwise agreed.

In some cases, the property manager may prepare the report. More commonly, an independent consultant is engaged, with costs shared between the landlord and tenant.