Finding the right commercial lease in Australia can feel like a high-stakes puzzle. In Sydney’s CBD, effective rents for A-Grade office space hit $986 per square metre in early 2026, while vacancy across the city sat at 13.8% — the highest level in roughly three decades. That combination of high rents and high vacancy tells you tenants have more leverage than usual, but only if you know which levers to pull.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
That gap between Premium and A-Grade rents has widened from about $190 in early 2018 to over $250 now. It’s a sign of what analysts call a “flight to value” — tenants are chasing quality, but they’re also watching every dollar. Here’s what you actually need to know before you sign anything.
A commercial lease is a contract that lets your business occupy a property — an office, shop, or warehouse — for a fixed period in exchange for rent and other payments. The type of lease matters. Retail leases come with extra tenant protections under state laws like the NSW Retail Leases Act. Commercial or office leases are more flexible. Industrial leases include specific operational clauses. And a licence agreement, like a co-working desk, gives you a lighter right to occupy without exclusive possession.
What I tend to notice is that many business owners rush past the heads of agreement stage. That’s where the real leverage sits — rent, incentives, term, and make good are all on the table before lawyers get involved.
What changes when you get the lease wrong
A bad lease doesn’t just mean higher rent. It can quietly drain your cash flow through outgoings you didn’t budget for, restrict how you use the space, and lock you into obligations that make it hard to grow or exit. The most common source of major leasing disputes is repair and maintenance responsibilities — who pays for what, and when.
In Sydney’s CBD, the flight to quality has created a two-tier market. Prime stock saw 56,678 square metres of positive net absorption in the second half of 2025, while secondary stock lost 45,319 square metres. That means tenants are voting with their feet — moving into better buildings and leaving older ones behind. If you sign a lease in a secondary building without negotiating incentives or an exit strategy, you could be stuck in a space that’s harder to sublet or assign later.
There’s also the risk of signing before approvals or landlord works are locked in. I’ve seen tenants commit to a lease only to discover the council won’t approve their fit-out, or the landlord’s promised renovations never materialise. The fix is an agreement for lease that ties the landlord to specific works with clear timelines and penalties.
Where people slip up — and how to avoid it
Missing the true cost beyond base rent
Base rent is only part of the picture. Outgoings — rates, insurance, cleaning, common area maintenance — can add 20–40% to your monthly bill. Some leases also pass through management fees and utility costs. Before you sign, ask for a breakdown of all outgoings for the previous year and check whether they’re capped or uncapped. If you need help understanding the numbers, a service like JustAnswer Finance can connect you with someone who works through lease cost structures regularly.
Permitted use that’s too narrow
Your lease will state what you’re allowed to do on the premises. If that description is too tight, you can’t pivot later — no adding a café to your retail store, no expanding into light manufacturing. Check zoning with your local council before signing, and negotiate a permitted use clause broad enough to cover reasonable future activities.
One-sided market rent reviews
Some leases include a market review clause that lets the landlord set the new rent without a cap. If the market jumps, your rent can spike. Look for a review method that uses independent valuation or caps the increase. A fixed percentage or CPI-linked review gives you more predictability.
Open-ended make good obligations
At the end of your lease, you’ll likely need to return the premises in their original condition — minus fair wear and tear. But “fair wear and tear” is often undefined. Without a clear clause, you could end up paying to remove a fit-out the next tenant could use. Negotiate a schedule of make good works upfront, and get a condition report signed at handover.
How to secure the right lease — step by step
Define your needs and budget before you look
Size, layout, accessibility, parking, foot traffic versus destination location — these all affect which properties are viable. Work out your total budget including rent, outgoings, fit-out costs, and a contingency. A 3–5 year term is common, but shorter terms give flexibility and longer terms lock in stability. Align the term with your business plan.
Negotiate the heads of agreement carefully
This document sets the commercial terms: base rent, rent review method, incentives, term, options, and make good. It can be binding, so don’t treat it as a rough draft. If you’re unsure about any clause, get a JustAnswer Business Law review before signing. Once the heads of agreement is signed, your negotiating room shrinks.
Do premises due diligence
Check zoning, planning controls, building compliance, essential services, and any centre rules or access restrictions. If the property needs council approvals for your intended use, confirm they’re obtainable before you commit. This step is often skipped, and it’s where hidden deal-breakers live.
Get a legal review and negotiate the lease
Have a leasing lawyer review the full contract. They’ll spot one-sided clauses on repairs, make good, relocation, demolition, and assignment. Negotiate amendments before signing — once the lease is executed, changes are much harder. If you’re on a tight budget, a service like JustAnswer Business can connect you with a lawyer for a one-off review rather than a full retainer.
Lock in works and timing in an agreement for lease
If the landlord is doing fit-out works or renovations, get them documented in an agreement for lease with completion dates and penalties for delay. This protects you if the space isn’t ready when you need it.
Final checks, signing, and security
Before signing, confirm the bank guarantee or bond amount — aim for 3–6 months’ rent rather than higher. Check that personal guarantees are capped or limited in duration. Then sign, arrange security, and prepare for handover.
Handover and condition report
At handover, do a detailed condition report with photos. This is your evidence at lease end for what counts as fair wear and tear. Both parties should sign it.
→ Scroll right to see all columns
| Grade | Effective Rent (per sqm) | Incentive | Vacancy |
|---|---|---|---|
| Premium | $1,163 | 35.5% | 8.9% |
| A-Grade | $986 | 36.8% | 16.6% |
| B-Grade | $732 | 41.4% | 16.0% |
The table shows a clear pattern: lower-grade buildings offer higher incentives to attract tenants, but vacancy is also higher. If you’re considering B-Grade space, the incentive might look tempting, but check whether the building’s age and location will make it hard to sublet or assign later.
Frequently asked questions about commercial leases in Australia
Can I break a commercial lease early? ▾
What’s the difference between a retail and commercial lease? ▾
How long should my lease term be? ▾
What are outgoings in a commercial lease? ▾
Do I need a lawyer to review my lease? ▾
What happens if my landlord sells the building? ▾
The market is shifting — make sure your lease moves with it
With Sydney CBD vacancy at historic highs and incentives still generous, tenants have rare leverage. But that window won’t stay open forever. New supply arriving in 2027 — including 55 Pitt Street (63,000 sqm) and the Atlassian HQ (57,000 sqm) — will shift the balance again. The leases being signed today will shape your costs and flexibility for years. Get the terms right now, and you’ll be in a stronger position when the market turns.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Essential Tips for Lease Contract Auditing When Renting Commercial Spaces.
Sources and Further Reading
Understanding Base Rent Calculations for Your Commercial Space — A deeper look at how base rent is calculated and what affects your final figure.
Key Considerations for Your Medical Office Lease in Australia — Specific guidance for healthcare tenants navigating commercial leases.
Tenant CS (2026). Australian Leasing Market Snapshot. 🔗
Sprintlaw (2025). Commercial Leasing in Australia: Key Terms and Negotiation Tips. 🔗
Sprintlaw (2025). Commercial Leases in Australia: What Businesses Need to Know. 🔗
LegalVision (2025). Entrepreneurs: Before Signing a Lease. 🔗
