Choosing business premises in Australia: what to assess before signing
Choosing the wrong premises is one of the hardest mistakes to fix
Unlike hiring the wrong staff member or choosing the wrong software, the wrong premises are usually locked in by a long-term lease. Getting out before the term ends almost always costs serious money.
Taking the time to assess thoroughly before you sign is not being overly cautious — it is simply the right process.
Location and foot traffic
It depends on your business model: Some businesses need high foot traffic (retail shops, restaurants, beauty salons) — for them, location is everything. Other businesses do not need customers to come to them (warehouses, service-based offices) — for them, location matters more in terms of access, price and infrastructure.
Visit at different times: A spot that is busy on a Wednesday morning may be deserted on a Friday evening — and vice versa. Observe the flow of people at the hours and on the days you will actually be operating.
Competitors nearby: Are there similar businesses in the area? This can be a good sign (there is demand in the area) or a bad one (the area is oversaturated), depending on the industry.
Access and parking: How do customers get there? Is there parking? Is there public transport? Is morning delivery access convenient?
The real cost — not just the rent
The advertised rent is usually a minimum figure, not the total you will actually pay:
Outgoings: Building management fees, building insurance, council rates — you may have to share part of these. Ask for a summary of the previous year’s outgoings to estimate them.
Utilities: Electricity, water, gas — who pays? If there are separate meters you pay directly; if not, they are usually charged through outgoings by floor area.
Fitout: The cost of renovating the premises to suit your business — anywhere from a few thousand to tens of thousands of dollars depending on what you need. Ask the landlord about a fitout incentive contribution (sometimes the landlord covers part of it).
Make-good: When the lease ends, you have to return the premises to their original condition — this cost can be large if you have done a lot of renovation.
GST: Commercial rent usually attracts GST — make sure you know whether the quoted price includes or excludes GST.
The physical condition of the premises
Check carefully before you sign:
- Electrical system: is the capacity enough for your equipment?
- Ventilation and climate control
- Internet and telecommunications connectivity
- Toilets and a staff break area (if needed)
- A kitchen or preparation area (if needed)
- Storage or warehouse space
Disability access: Australian law requires businesses to make reasonable adjustments for people with disability. The premises you lease need to provide for this or be capable of being adjusted to — confirm with the landlord and council if needed.
Building rules: Are the premises suitable for your type of business under the council’s planning regulations? Premises leased as “office” cannot automatically be used as a restaurant or a manufacturing facility.
Lease conditions — ask before you get attached
Before you put a lot of time into a specific property, ask the landlord some basic questions:
- How many years is the lease term, and is there a renewal option?
- How is the rent reviewed, and on what basis?
- Is there a rent-free period?
- Who pays for the fitout — does the landlord contribute?
- What is the permitted use — does it suit your business plan?
- Are there any clauses that restrict your operations?
These questions are not about negotiating straight away — they are to quickly work out whether these premises are worth investing more research time in.
Before you sign anything
Even before you sign the formal lease, some preliminary documents (a letter of intent, a heads of agreement) can carry certain binding obligations — especially around confidentiality and exclusivity. Do not sign anything to do with the premises before a solicitor has read through it.
See the related guides on heads of agreement and letters of intent, and on commercial leases in Australia, before moving to the next step.