How to Negotiate the Best Lease Terms for Your Shop
If there’s one thing I see time and time again, it’s shop owners signing a lease they don’t fully understand—only to realise months (or years) later that they’ve committed to something that doesn’t actually work for them.
And it’s not just first-time retailers who get caught out—I’ve seen big-name brands make the same mistakes.
The reality is, leases are complex, and landlords don’t exactly go out of their way to make them easy to understand. But the good news? With a bit of knowledge (and the right negotiation strategy), you can secure a deal that sets your business up for success—without getting caught out by hidden costs or rigid terms that don’t work for you.
Let’s walk through the key things you need to know before you sign on the dotted line.
1. Know the Key Lease Terms (Before You Start Talking Numbers)
If you don’t understand the basic lease terms, you’re negotiating blind. Before you even start discussions, make sure you know what these key terms mean:
- Base Rent – The fixed monthly amount you’ll pay. Does it align with your budget and sales forecasts?
- Outgoings – Additional costs like council rates, insurance, and cleaning. Are these included in your rent, or are they extra?
- Rent Reviews – How (and how often) will your rent increase? It might be a fixed percentage (e.g., 3% annually) or tied to CPI (inflation). Either way, you need to plan for it.
- Term & Renewal Options – How long is your lease? A longer lease gives stability, but shorter terms with renewal options can give you flexibility if things change.
- Leasing Incentives – Many landlords offer incentives (like rent-free periods or contributions to your fitout costs) to secure tenants—but you have to ask for them.
- Net Rent vs Gross Rent – A net rent deal means you pay rent plus additional outgoings. A gross rent includes outgoings as part of the total rent. Make sure you understand the difference before comparing deals.
2. Do Your Homework Before Negotiating
The more you know, the better your negotiating position. Here’s what you need to research:
- Comparable Rents – What are similar shops paying in the area? Look online or speak to local leasing agents.
- Vacancy Rates – Is the shopping centre (or street) full or struggling to attract tenants? If vacancies are high, you have more room to negotiate.
- The Landlord’s Position – If the property has been sitting empty for a while, the landlord might be more willing to offer rent reductions or incentives.
Landlords expect tenants to negotiate. If you go in blindly accepting everything they offer, you’ll end up paying more than you need to.
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3. Use Your Fitout as a Bargaining Tool
A new fitout isn’t just expensive for you—it’s also something the landlord wants done properly so their property remains attractive for future tenants. Use this to your advantage.
Here’s what you can negotiate:
- Fitout Period – Can you get extra time rent-free to complete your fitout before you start paying rent?
- Rent-Free Periods – Can you secure a few months’ free rent after opening, to help you get up and running?
- Landlord Contributions – Will they contribute cash towards your fitout? Some landlords have budgets for this—but they won’t offer it unless you ask.
- Landlord Works – If the property needs big-ticket items like plumbing, air-conditioning, or a grease trap, push to have the landlord cover these costs instead of you.
The key? Frame your requests as a win-win. Explain how these concessions will help you open faster and ensure a successful business—because that benefits the landlord too.
4. Build Flexibility Into Your Lease
You might feel certain about your shop now, but things can change. Negotiating flexibility upfront could save you major headaches (and money) down the track.
- Early Termination Clause – If this is your first shop, can you negotiate an exit clause in case things don’t work out?
- Subletting & Assignments – If you ever need to sell your business or exit the lease early, will you be able to transfer your lease to someone else?
- Relocation Clauses – If you’re in a shopping centre, check if the landlord has the right to move you to another location—and if so, what compensation you’d get.
5. Get Professional Advice (It’s Worth It!)
Leases are legally binding contracts—and they’re written in favour of the landlord. In some states it’s mandatory for small business owners to have legal representation, but even if it’s not, get a lawyer who specialises in retail leasing to review the terms before you sign anything.
They’ll spot hidden traps (like unexpected fees or clauses that lock you into paying for things you shouldn’t have to). A small upfront cost here could save you thousands down the track.
Key Takeaways
- Know the key lease terms – Base rent, outgoings, rent reviews, and incentives all impact your bottom line.
- Do your research – Vacancy rates and comparable rents will give you leverage.
- Negotiate fitout support – Push for rent-free periods, contributions, or landlord-funded works.
- Protect your flexibility – Make sure your lease gives you options if your business needs change.
- Get legal help – A lease mistake can be very expensive. Don’t risk it!
FAQ
How much should I budget for rent? A common rule of thumb is 10-15% of your projected sales—but this varies by location and industry. Make sure your lease fits your financial model.
What if the landlord won’t negotiate? Don’t be afraid to walk away. There are always other properties, and landlords often reconsider when they see you’re serious about getting a fair deal.
How can I get out of my lease early? The best time to negotiate this is before you sign—by including an early termination clause or ensuring you can assign or sublet your lease.
Should I hire a leasing agent? If you’re new to commercial leasing, a tenant representative or leasing agent can help negotiate on your behalf—and often save you money in the long run.
Final Thoughts
Signing a lease is one of the biggest financial commitments you’ll make in your business—so don’t rush it. Take your time, do your research, and negotiate hard.
And if you need help, I’m here to guide you through it. Get in touch if you have questions—I’d love to help you set up your shop the right way.
