Net vs gross lease: what is the difference?
In a gross lease the rent is a single all-inclusive figure and the landlord pays the building outgoings out of it. In a net lease you pay a base rent and then your proportional share of outgoings on top, so the quoted rent is not what you actually pay. The same office can be quoted either way — what changes is who carries the risk of outgoings rising during the term.
- Gross lease
- One rent figure. Landlord pays outgoings.
- Net lease
- Base rent plus your share of outgoings.
- Semi-gross lease
- Outgoings included at a fixed base year; you pay increases after that.
- Serviced / flex offices
- Effectively fully gross — one monthly fee.
- Compare quotes on
- Gross-equivalent rent per m² per year.
What a gross lease is
A gross rent bundles the landlord's running costs into one number. Council and water rates, building insurance, cleaning of common areas, security, lift and air-conditioning maintenance and management fees are all met by the landlord out of the rent you pay. Your budget is a single line, fixed except for the rent reviews written into the lease.
The trade-off is that the landlord is pricing in the risk of those costs rising, so a gross rent will normally sit above the base rent of an equivalent net deal.
What a net lease is
A net rent is the landlord's return on the building, and nothing else. Outgoings are billed to you separately, usually as a monthly estimate that is reconciled against the actual expenditure after the end of the accounting year. Your share is worked out by dividing your lettable area by the total lettable area of the building.
Net leases dominate A-grade and premium CBD buildings. They are transparent — you can see exactly what the building costs to run — but the number you sign up to is not the number you pay.
Semi-gross, and why it exists
A semi-gross lease is the common Australian middle ground. Outgoings are included in the rent, but only at the level they sat at in a nominated "base year". Once actual outgoings exceed that base, the increase is passed through to you.
The detail that matters is which year is the base year. A base year set at the start of the lease means you absorb every increase from day one; a base year set later, or reset at each review, meaningfully reduces what you pay.
Comparing a net quote against a gross quote
Two proposals are only comparable once both are expressed the same way. Convert the net quote by adding the landlord's current outgoings estimate to the base rent, and ask for the last reconciliation statement so you can see how accurate previous estimates were.
Then check the escalation mechanism on both — a lower gross rent with 4% fixed annual increases can overtake a higher net rent reviewed to CPI within a few years.
Which suits your business
A gross or semi-gross lease suits teams that value budget certainty and do not want to audit a landlord's expenditure. A net lease suits tenants large enough for outgoings to be worth scrutinising, and those willing to trade certainty for a lower headline rent.
If you want neither conversation, a serviced or flexible office is the fully-gross end of the market — one monthly fee covering rent, outgoings, fitout, furniture, internet and reception.
| Structure | Who pays outgoings | Rent quoted as | Typically seen in |
|---|---|---|---|
| Gross | Landlord | One inclusive figure | Smaller and suburban buildings |
| Semi-gross | Landlord to a base year, tenant pays increases | Base rent, plus increases over base year | B and C grade offices |
| Net | Tenant, by proportional share | Base rent, outgoings billed separately | A-grade and premium CBD |
| Serviced / flex | Operator | All-inclusive monthly fee | Flexible workspace |
Common questions
Is a gross lease more expensive than a net lease?
What does semi-gross mean in a commercial lease?
Is serviced office pricing gross or net?
Does a gross lease mean my rent never increases?
How do I compare a net quote with a gross quote?
General information only. This guide explains how office leasing usually works in Australia. It is not legal, financial or tax advice, it does not take account of your circumstances, and lease terms and legislation change. Get advice on your own lease before you sign it.
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