Ground Leases in Australia: 2025 Guide for Investors & Businesses

As property prices soar and land availability tightens, Australian businesses and investors are increasingly looking for creative ways to access high-value real estate without tying up millions in upfront capital. Enter the ground lease: a time-tested but often misunderstood tool that’s starting to reshape the landscape of commercial property finance.

What Is a Ground Lease?

A ground lease is an arrangement where a tenant (often called a lessee) leases land from a landlord (the lessor) for a long term—often 30 to 99 years. Unlike standard property leases, the tenant is usually responsible for developing, operating, and maintaining any buildings or infrastructure on the land during the lease term. When the lease expires, ownership of the improvements typically reverts to the landowner, unless otherwise agreed.

• Long-term control: Leases can run for decades, offering stability for major developments.

• Separation of land and building ownership: The landowner retains title to the land, while the tenant owns (or finances) the buildings and improvements during the lease.

• Rental payments: Instead of buying the land, the tenant pays regular rent to the landowner, freeing up capital for other uses.

This structure is popular for commercial real estate (think shopping centres, hotels, and logistics hubs), and is also being explored for affordable housing and renewable energy projects.

2025 Policy Updates and Trends

The ground lease model isn’t new, but the 2025 policy landscape is making it more attractive—particularly in Australia’s major cities. Recent government initiatives and planning reforms are encouraging both public and private landholders to consider ground leases as a way to unlock underused land and promote urban renewal.

• NSW Land Release Strategy: The NSW government’s 2025 strategy includes ground leases as a tool for activating surplus government land for housing and commercial use, aiming to balance public ownership with private investment.

• Superannuation fund involvement: Australian super funds, seeking stable long-term returns, are increasingly partnering with developers on ground lease deals, especially for build-to-rent and mixed-use precincts.

• Tax and stamp duty updates: Recent tweaks to land tax and stamp duty treatment for long-term leases (over 50 years) are making ground leases more appealing for both lessors and lessees.

In 2025, several major ground lease developments are in the works in Sydney and Melbourne, including precinct-scale regeneration projects where local councils retain land ownership but invite private sector expertise for development and management.

Benefits and Risks: Who Should Consider a Ground Lease?

Ground leases can offer a win-win for both landowners and tenants—but they’re not for everyone. Here’s what to weigh up:

• For Landowners:

  • Retain long-term ownership and potential for capital growth

  • Generate stable income from rent

  • Transfer development risk and costs to the tenant

• For Tenants/Developers:

  • Lower initial capital outlay compared to land purchase

  • Flexibility to build, manage, and profit from improvements during the lease

  • Access to prime sites that may not be for sale

However, ground leases come with complexity. Rent escalations, lease renegotiations, and the risk of losing improvements at lease expiry must be carefully negotiated. Lenders also scrutinise ground leases closely—while more banks are open to financing such arrangements in 2025, terms can be stricter than for freehold property.

Real-World Example: In 2025, a major logistics company secured a 60-year ground lease on government-owned industrial land near Port Botany. Rather than pay $50 million for the land, they pay annual rent and invest in state-of-the-art warehousing. The government retains long-term control, while the company focuses its capital on operations and growth.

Key Considerations for 2025 Deals

• Lease terms and rent review: Ensure the escalation clauses are fair and predictable. CPI-linked increases are common, but some leases include market reviews every 5–10 years.

• End-of-lease provisions: Understand what happens to buildings and improvements when the lease expires. Can you extend the lease? Negotiate a buyout?

• Financing hurdles: Some lenders may require higher deposits or loan-to-value ratios. Check whether your lender is comfortable with ground lease security.

• Tax implications: Ground rent is deductible for businesses, but GST and land tax can still apply. Recent ATO guidance in 2024 clarified GST treatment for long-term commercial leases—review with your accountant.

• Planning and zoning: Ground lease deals often involve public land or complex zoning. Ensure all planning approvals are locked in before signing.

Conclusion: Is a Ground Lease Right for You?

Ground leases are not a one-size-fits-all solution, but in 2025’s competitive property market, they offer a nimble way to access valuable land and drive development. Whether you’re a landowner seeking steady returns or a business aiming to expand without buying land, ground leases deserve a close look. With the right structure, they can deliver flexibility, security, and new opportunities for Australian property players.