As industrial occupiers face mounting pressure on total occupancy costs, outgoings have become an increasingly important consideration in leasing decisions. Rising property related expenses are prompting businesses to look beyond headline rent and take a more holistic view of occupancy costs. The INDUSTRIALIST spoke with Ben Cunningham about what occupiers need to know, what to watch for and how to build greater cost certainty into lease decisions.
For those less familiar with the concept, what are outgoings?
Outgoings are generally interpreted quite broadly and refer to expenses incurred or payable in relation to the ownership, management or operation of a property. Put simply, they are property-related costs incurred by the landlord and recovered from the tenant under the terms of the lease.
Outgoings have become topical in the industrial property market. Why are occupiers paying closer attention to them?
Outgoings have come under greater scrutiny as occupiers look more closely at the total cost of occupation, not just headline rent. With costs such as land tax, council rates and insurance continuing to rise, outgoings can have a material impact on annual occupancy costs and long-term property decisions.
Nationally, outgoings have increased by 11.4% over the 12 months to Q3 2026, which is adding cost pressure even where rental growth is moderating. Additionally, since 2020, prime outgoing costs have jumped by almost 65% and are an increasingly significant component of total occupancy costs. For cities like Melbourne, the rate of growth has been even stronger, with outgoing costs more than doubling over the same period.
What are some practical ways occupiers can better manage these costs?
There are many strategies that occupiers can adopt to effectively manage these costs, these include:
- Negotiating Caps: When entering lease negotiations, tenants should strongly consider negotiating caps on outgoings for at least part of the lease term. In addition, occupiers may benefit from capping specific components, such as management fees and certain repair or maintenance expenses, to limit exposure to unexpected increases.
- Full Disclosure: Request a detailed outgoings budget or estimate during negotiations. This level of transparency helps verify that all charges are legitimate and provides a clearer understanding of the landlord’s cost structure before committing to the lease.
- Remove Foreign Owner Surcharges: Confirm whether the landlord is a foreign entity, as this may trigger additional Land Tax surcharges. Identifying this early allows tenants to assess whether these costs will be passed through and how they may impact total occupancy expenses.
- Audit Expenses: Ensure the landlord provides an audited outgoings statement following each financial year. This provides assurance that charges are accurate and compliant, while also giving tenants the opportunity to question or challenge any discrepancies.
What is your key advice for occupiers approaching lease expiry?
Don't look at rent in isolation. Take a holistic view of your occupancy costs and understand how outgoings may change over the life of the lease. Early planning gives occupiers more options, stronger negotiating leverage and a clearer understanding of whether remaining in place or exploring alternatives will deliver the best outcome for their business.
