Typical office lease terms by building grade

Serviced and flexible offices

Legally these are usually licences rather than leases, which is why they are short and simple. Terms run from month to month out to twelve months, priced as one all-inclusive monthly fee covering space, outgoings, fitout, furniture, internet, reception and a meeting-room allowance.

There is no make good, no separate outgoings reconciliation, and normally a deposit of a month or two rather than a bank guarantee. You are paying a premium per square metre for the flexibility and for not having to fund a fitout.

C and B grade buildings

The mainstream of suburban and fringe office leasing. Terms of three to five years are standard, quoted gross or semi-gross so the tenant deals with one figure. Rent reviews are usually a fixed percentage each year, sometimes CPI. Incentives exist but are modest compared with the CBD, and are more often taken as rent free than as a fitout contribution.

Many of these tenancies come with an existing fitout, which is the single biggest cost saving available in this part of the market — and a reason to push for an "as at commencement" make good standard.

A grade buildings

Five to ten year terms, quoted net, with outgoings billed separately and reconciled annually. Incentives are substantial and usually structured at least partly as a fitout contribution. Expect a bank guarantee measured in months of gross rent, a market review at any option, and a make good obligation drafted to base building.

This is the part of the market where the gap between face rent and effective rent is widest, and where comparing proposals on effective rent rather than headline rent changes the answer most often.

Premium buildings

The longest commitments and the largest incentives, frequently with the landlord building the fitout to an agreed specification. Terms are negotiated in detail rather than taken from a standard form, and lease documentation, security and make good obligations are correspondingly heavier.

Reading this table properly

These are conventions, not market data. What is standard for a grade tells you where to start negotiating; it does not tell you what a specific building will accept this quarter. For actual rents with sample sizes and as-at dates, use the suburb benchmarks — and for what a particular building will do, ask.