Everything in a commercial lease is negotiable. But only before you sign it.
Once you've signed, every term you didn't push back on is locked in for the next 3, 5, or 10 years. Here's how to negotiate a lease that actually works for your business.
Know the Market First
You can't negotiate well without knowing what similar space in your suburb is actually leasing for — not just what it's advertised for. Ask your agent for recent comparable leases, including what incentives were given.
Also check how long the property has been on market. A property sitting vacant for 90+ days gives you substantially more leverage than one that listed last week.
Get Everything Agreed in the Heads of Agreement
A Heads of Agreement is a summary document where you agree the commercial terms before a formal lease is drafted. This is where your negotiating power is highest.
Get these terms settled in writing before a lawyer touches the formal lease:
- Net face rent and any rent-free period
- What the landlord will complete before you move in
- Fit-out contribution amount (if applicable)
- Rent review mechanism (fixed % is better than CPI)
- Options to renew and the exercise process
- Permitted use — keep this as broad as possible
- Make good obligations in principle
Once your solicitor starts drafting a formal lease without an agreed Heads of Agreement, you have already given up negotiating power.
Rent and Incentives: How to Approach It
Open 10–15% below the asking rent, with supporting evidence. In the western suburbs market right now, most landlords with vacant space will negotiate — especially if you can offer a longer term or an earlier start date.
If the landlord won't move on face rent, push on incentives. A larger rent-free period or a fit-out contribution is economically equivalent to a lower face rent — landlords are often more flexible on incentives because the face rent protects their property valuation.
Limit Your Make Good Exposure
Make good clauses can be expensive. The fix is simple: document the property's condition thoroughly at the start (photos, agreed in writing) and negotiate specific, itemised make good obligations — not an open-ended obligation to "restore to original condition."
Always push for the right to pay a cash settlement instead of doing physical works at the end. Most landlords prefer it.
The Personal Guarantee: Contain It
Every landlord will want a personal guarantee. Your goal is to contain it. Push for:
- A limit of 3–6 months' gross rent (not the full lease term)
- A sunset clause that removes the guarantee after X years of on-time payments
- A bank guarantee as an alternative — a fixed, capped liability that doesn't expose personal assets
Never sign a personal guarantee without specific legal advice on what you're actually exposed to.
→ Full leasing guide: Commercial Leasing in Melbourne's Western Suburbs
→ Industrial space: Truganina, Derrimut & Laverton
→ Retail space: Footscray, Sunshine & Werribee
→ Office space: Williams Landing, Tarneit & Melton