Category:   Commercial Lease

Date:   26 October 2022

Last Update:   20 November 2024

Commercial Leasing Guide: Our Tips

While commercial leasing is an exciting prospect for some, for others, it comes with a degree of uncertainty.

As commercial property managers operating in Perth’s South-East for more than 35 years, we have come to know the ins and outs of commercial leasing. Our time in property management, commercial property appraisals, buying and leasing commercial properties has taught us how to make uncertainty, certain. Now we are sharing our tips with you. 

Whether you’re new to leasing commercial properties or just want a recap, here’s our guide to commercial leasing in Perth.

What does a commercial lease entail?

Commercial leasing is similar to the rental agreement for a house in that it’s an agreement between a landowner and a tenant. For commercial leases however, the property is usually an office, warehouse, or industrial space, and is to be used for business activities.

A commercial lease is held together by a contract which should include the following details:

• Outline of the property, plus details of the landowner (lessor), and tenant (lessee).
• Rent amount – usually as an annual figure, finalised following a commercial property appraisal. 
• How long the lease term is and clauses for renewing.
• Responsibility alignment for maintenance or repairs.
• Any outgoings required, including rates and insurance.
• The permitted uses of the property and the hours for which the business can trade (if applicable).
• Various other processes including dispute resolution and clauses such as subleasing agreements.

Commercial leasing tips prior to signing

If you’ve decided commercial leasing is the next step for your business, there is much to consider before you sign on the dotted line.

A long-term commitment (usually)

Unlike residential agreements, commercial leasing is usually a long-term commitment. If your business is starting out, you may negotiate a shorter lease and then options to renew. However, most commercial leasing agreements are between 3 and 10 years, though sometimes separated with renewal options.

A longer lease is better for established businesses as it offers more security.

Consider the location

You should know your business better than anyone – use this to your advantage. When looking for a commercial property to lease, it’s crucial to consider its location. The location should benefit your business operations, so determine:

• If it’s easily accessible by employees.
• If the property is near and easily accessible by your clients/customers (if needed).
• If the property is near required facilities such as a supplier, warehouse, and recreational facilities.
• If there’s direct supply routes for any stock or equipment your business needs.
• If the area is familiar to others in your industry. A common commercial or industrial area is often desirable as there’s better visibility and options for commercial partnerships.

Consider your business needs

Much like the location of the commercial lease, you should consider the current and future needs of your business. The perfect property will meet your needs and wants in the short and long-term – though the perfect property is hard to come by, and you may need to target just your core business needs.

Some core business needs that may align with your company:

• Bathroom and toilet facilities.
• Parking on-site or nearby.
• Sufficient storage space.
• A reception or office area (if separate to your main business operations).
• Kitchen or other communal areas away from the workspace.
• Options for signage and other important messaging.

It’s wise to create a checklist or graph to ensure all needs are met when exploring the options available.

Know your worth

Not knowing the true value of your commercial property is one of the quickest ways to lose out on your investment. Understanding your market position will help you set the right price for your property without risking vacancy or losing out. When setting your rental amount, an amount too high can leave your property on the market for months. On the other hand, an amount too low will cause you to lose out on investment gains month-on-month.

If you’re not sure what your property is worth, or are just seeking a second opinion, our team offers no-commitment Perth rental valuations. These valuations are conducted first-hand by our experts, with an appraisal process that has been honed over decades of expertise, to help you feel confident in your investment.

Financial planning

Having a clear plan on the financial side of the lease is undeniably the most important step before signing a commercial lease. Ensure your business is stable and capable of paying the rent as well as the various outgoings required.

In most cases you’ll need to provide the landlord with proof of financial security too. For example, a proven bank guarantee or a negotiated and paid security bond – with the proviso that it’s repaid in part or full as required at the ending of the lease.

It pays to have a financial advisor or reliable commercial real estate agent to help get your financials in order.

Carefully examine the lease for unexpected clauses

A commercial lease often includes a vast number of clauses unique to the property in question. It’s pivotal that you understand and agree to all underlying clauses before you sign off on the contract. Other common components included in a commercial leasing agreement are:

• ‘Make good’ clause.
• Subletting clauses.
• Terms for ending the lease early or extending it (Option clause).
• Rent review processes.
• Condition reports – ensure you have a record of these.

After agreeing on any terms and conditions, it’s important to keep the records on hand to ensure a smooth lease post signing.

At Ross Scarfone Real Estate, we can assist you with negotiating a commercial lease in Perth – see our properties for lease.

Commercial leasing tips post settlement

So, you’ve signed a new commercial lease, congratulations!

Here’s a few points to remember.

Landlord approval

Before making any changes to the property, always seek the approval of the landlord. Depending on the changes, your landlord may be required to pay for them – but you’ll need to check the commercial leasing agreement.

However, you should consider any ‘make good’ clause in the leasing agreement. Depending on the work done on the property, you may have to return it to its original state.

Security

If your business utilises valuable equipment, make sure to ensure the property is well secured. The security details should’ve been outlined in the lease, but if a previous tenant still has access, you should update these systems.

Enquire about changing the locks and/or changing the access codes used on the premises.

Rent reviews

Keep track of the rent review clauses in the lease to ensure any rent reviews are in line with what was agreed. If no clause exists, consult a professional before agreeing to any changes in the rent amount.

Make use of sublease or reassign clauses

If the property you’ve acquired has empty rooms, consider any clauses surrounding subletting or reassignment. These options can benefit your business if you’re some time away from filling out the property.

Ready for commercial leasing in Perth?

Many business owners are on the fence about commercial leasing or buying, so which is best for you?

If you’re after an office or similar commercial property, see our comparison between buying and leasing.

Either way, Ross Scarfone Real Estate is here to help! We’re the commercial and industrial real estate agents for Perth’s south-east, specialising in property sales and commercial leasing agreements. If you’re after a commercial property for lease, see our listings.

Or contact us for any other commercial real estate enquiries.