Gross leases are back in the spotlight as commercial property markets across Australia adapt to shifting economic winds in 2025. Whether you’re a business owner looking for your next office space or a landlord seeking a steady rental income, understanding the ins and outs of a gross lease is crucial for making smart property decisions this year.
What Is a Gross Lease?
In a gross lease arrangement, the tenant pays a single fixed rental amount, while the landlord covers all (or most) property outgoings—think council rates, building insurance, and basic maintenance. This contrasts with a net lease, where tenants take on some or all of these variable costs in addition to rent.
Gross leases are most common in office spaces, some retail premises, and even select industrial properties. With commercial real estate markets in Sydney, Melbourne, and Brisbane experiencing renewed demand from small businesses in 2025, gross leases are increasingly preferred for their simplicity and predictability.
Why Gross Leases Are Trending in 2025
- Economic Uncertainty: With inflation moderating but energy and insurance costs still volatile, tenants value the cost certainty of a gross lease. Fixed rent means no nasty surprises when quarterly outgoings spike.
- Regulatory Shifts: New 2025 updates to state-based retail lease legislation in New South Wales and Victoria have further clarified disclosure obligations for landlords, making gross leases easier to compare and negotiate.
- Landlord Incentives: Some landlords now offer gross leases as a sweetener to attract long-term, stable tenants in a market where vacancy rates remain higher than pre-pandemic norms, especially in suburban office precincts.
Gross Lease Pros and Cons for Tenants
Before signing on the dotted line, tenants should weigh these factors:
- Simplicity: One predictable payment each month makes budgeting easy, especially for small businesses and startups.
- Risk Buffer: Landlords absorb most fluctuations in rates, insurance, and maintenance, which can be a boon during periods of cost volatility.
- Potential Higher Base Rent: Because landlords factor in average outgoing costs (and a buffer for risk), the base rent in a gross lease is typically higher than in a net lease.
- Limited Control: Tenants have less say over how the landlord manages building expenses, which can affect service levels or property quality.
Example: In 2025, a Sydney tech startup might pay $60,000 per year under a gross lease for a mid-tier Surry Hills office, knowing their total occupancy costs won’t change, even if council rates or building insurance jump mid-lease.
Landlord Considerations: Balancing Risk and Reward
For landlords, gross leases offer both opportunities and challenges:
- Marketability: Offering a gross lease can help attract risk-averse tenants and reduce vacancy periods.
- Cost Management: Landlords need sharp budgeting skills to ensure rent covers all outgoings, especially with ongoing changes to property insurance premiums in 2025.
- Flexibility for Negotiation: Some landlords use a modified gross lease—where tenants pay rent plus certain agreed outgoings—to share risk while keeping leases attractive.
Policy Update: In Queensland, updated guidance from the Office of Fair Trading in 2025 now requires all gross lease agreements to clearly itemise included outgoings in the disclosure statement, helping prevent misunderstandings and disputes.
Key Tips for Negotiating a Gross Lease in 2025
- Request a detailed breakdown of what’s included in the gross rent, and confirm there are no hidden exclusions (e.g. cleaning, air conditioning servicing).
- Understand the process for annual rent reviews—most gross leases still include CPI or fixed-percentage increases each year.
- Check whether major capital works (like roof replacement or lift upgrades) are covered by the landlord or could be passed through as a special charge.
- Review the lease’s make-good clauses to clarify end-of-lease obligations for reinstatement or repairs.
The Bottom Line
Gross leases offer clarity and predictability, which are increasingly valuable in Australia’s evolving commercial property landscape. Whether you’re a tenant seeking peace of mind or a landlord aiming to attract stable businesses, understanding the mechanics and market trends behind gross leases is essential for successful negotiations in 2025.
