Commercial rent review just landed: should you stay, negotiate or move?

A rent review notice has a way of landing at the worst possible moment. It’s often a single page from the agent with a new figure on it and a date, and suddenly you’re asking yourself a big question: can we afford to stay here?

Here’s the coaching answer in one breath. Don’t accept, refuse or start looking at other shops until you’ve done three things. Check what your lease allows. Turn the increase into the extra sales you’d need each week. Price up what moving would really cost. Once you’ve got those three numbers side by side, the decision usually makes itself. This guide walks you through each one, then gives you a scorecard to settle it.

Step 1: What does your lease actually allow?

Before you react to the number, find your lease and look for the rent review clause. Most fall into one of three types, as the Queensland Small Business Commissioner explains:

Review type	How it works	How much room to move
Fixed increase	A set percentage or dollar amount each year	Very little. It’s already agreed
CPI review	Rent moves with the Consumer Price Index	Little. Check the calculation and the CPI figure used
Market review	Rent resets to “market” at set points, often at an option	The most. This is where negotiation matters

There’s a fourth situation too: the lease is ending and there’s no option to renew. In that case the landlord can offer a new lease on new terms, or not offer one at all. The Queensland commissioner puts it bluntly: no legislation limits the rent increase a landlord can ask for on a new lease. It’s a negotiation, not a dispute.

While you’re in the lease, jot down:

• The review date. Increases usually apply from this date even if the notice arrives late.
• Any deadline to respond or dispute. Some leases give a short window to object to a market figure.
• Your option dates. If you have an option to renew, there’s usually a window to exercise it. Miss it and you may lose the option.
• Whether it’s a retail shop lease. Retail leases are covered by state legislation with extra protections. Offices, warehouses and workshops often aren’t.

What if it’s a market review on a retail shop?

This is where the state rules really help you. In Queensland, if you and the landlord haven’t agreed on market rent within one month after the review date, a specialist retail valuer must determine it. The valuer’s fee is split equally. Queensland’s retail lease law also bans ratchet clauses, which stop rent ever going down at a market review.

In Victoria, if you can’t agree on the rent or on a valuer, the Victorian Small Business Commission can arrange for one to be appointed. The valuer generally has 45 days to make the determination. The VSBC is frank that the valuer’s fee “is significant”, so it suggests trying hard to agree first, especially on lower-rent premises. Other states have their own small business commissioners and rules, so check yours.

Step 2: How much extra do you need to sell to stand still?

A rent increase sounds like a cost problem, but it’s really a sales problem. Every extra dollar of rent has to come out of gross profit. That means you need to sell more than a dollar to cover it.

Here’s the sum:

1. Annual increase ÷ 52 = extra rent per week.
2. Extra rent per week ÷ gross margin (as a decimal) = extra sales needed per week.
3. Compare that with your quietest weeks, not your average.

If you don’t know your gross margin off the top of your head, our business health check shows you how to find it in about five minutes.

Then ask yourself honestly whether those extra sales can come from somewhere. Could you lift prices a little, extend your hours, add a product line or win more online orders? Or would the increase simply eat your profit?

Step 3: What would moving really cost?

Moving often looks cheaper than it is because the costs are spread across different bills and different months. Add up every one:

• Fit-out for the new site: shelving, counters, lighting, signage, IT, plus any council or landlord approvals.
• Bond or bank guarantee. Many landlords want several months’ rent as security up front.
• Rent in advance and agent or legal costs for the new lease.
• Make good at your current site. Most leases require you to return the premises to their original condition.
• Downtime. Days or weeks closed or half-set-up, while wages and other costs keep running.
• Customer loss. Some regulars and walk-in trade won’t follow you, at least not straight away.
• Overlap. You may pay rent on two sites for a few weeks.

business.gov.au’s guide to choosing a business location is a useful check that a new site actually suits your customers. Cheaper rent in the wrong spot isn’t a saving.

Feeling that the numbers point towards a fit-out, a move or a buffer to get through the change? You can check your options with a quick enquiry. There’s no credit check when you first enquire.

Your stay, negotiate or move scorecard

Score each question 2 for yes, 1 for “partly” and 0 for no.

#	Coaching question	Score
1	Can your quietest weeks cover the extra sales needed under the new rent?
2	Is the location doing real work for you (foot traffic, visibility, parking, regulars)?
3	Is your current fit-out in good shape for the next lease term?
4	Have you got comparable rents for nearby premises to negotiate with?
5	Would moving cost more than two years of the rent increase?
6	Could you run the business through a move without a cash squeeze? (Score this one in reverse: 0 for yes, 2 for no.)

How to read it:

• 9–12: Lean towards staying. Negotiate hard (term, incentives, a rent-free period, fit-out contribution), but the site is earning its keep.
• 5–8: Negotiate seriously before deciding. Get a second opinion on market rent, and price up one or two real alternatives so your bargaining position isn’t a bluff.
• 0–4: Start planning a move. Give yourself as much lead time as the lease allows, and line up the cash before you sign a new lease.

It’s a coaching tool, not a formula. A location that scores low today might still be right if the alternative sites are weak.

Illustrative example: a boutique weighing up a market review

Illustrative only. Not a real client.

Mia runs a clothing boutique in a suburban shopping strip. Her lease includes a market review at the start of her option term. Her rent is currently $52k a year, and the landlord’s agent has proposed $63k.

Step 1 — the lease. It’s a retail shop lease with a market review, so there’s a process if they can’t agree. Mia notes the review date and her option deadline.

Step 2 — the sales test. The increase is $11k a year, about $212 a week. Her gross margin is around 55%, so she needs roughly $385 more in sales each week (212 ÷ 0.55) just to stand still. In her quietest months, that means lifting weekly takings by around 7%. It’s not impossible, but it’s tight.

Step 3 — moving costs. A vacant shop two streets away is cheaper. But her estimate for a basic fit-out, bond, make good on the current shop, a fortnight’s downtime and new signage comes to well over two years of the rent increase, before counting lost walk-in trade.

Scorecard: 7. Negotiate seriously.

What she does: Mia collects asking rents for three nearby shops and counters at $57k, asking for a longer term and some help refreshing her fit-out. They settle in between. She then funds a modest fit-out refresh so the store can earn the extra sales the new rent needs. She keeps the repayment small enough to fit her quietest month.

The lesson isn’t “always stay”. The lesson is that Mia made the decision with three real numbers rather than a gut reaction to a letter.

How do you negotiate a rent review well?

A few habits make a real difference:

• Respond in writing and on time. Missing a deadline can weaken your position or cost you an option.
• Bring evidence. Comparable rents, vacancy rates on your strip and any condition issues with the premises.
• Negotiate the whole package, not just the number. Term length, rent-free months, a fit-out contribution, outgoings and future review method all have value.
• Know your walk-away point. Your Step 2 and Step 3 numbers tell you where it is.
• Get advice where the stakes are high. A property lawyer or leasing adviser can be worth the fee on a long lease.

Plan the cash before you commit

Whatever you decide, there’s usually a cash moment attached. Staying might mean backdated rent or a fit-out refresh. Moving means a bond, fit-out and a gap while trade rebuilds. Our cash runway guide helps you see how many weeks of buffer you’d have through that change. The fit-out and premises page explains how owners typically fund a move or refurbishment.

If you’re in retail, our retail finance options page covers the money rhythms that matter most for shops: stock, seasonal peaks and quiet months.

Ready to fund your next lease? See what fits you

A rent review is really a decision about the next five or ten years of your business. Whether you’re refreshing the shop you’ve got or setting up somewhere new, you’ll make a better choice when you know what funding is available to you before you sign.

That’s where we come in. Our enquiry takes about 60 seconds, and there’s no credit check when you first enquire. We don’t send your details to a pile of lenders, so your phone won’t light up with calls from strangers. A real person reads your answers, looks at your situation (your lease, your trading and your plans) and calls you to talk it through.

One request: please fill the form in accurately, including what the money is for, roughly how much you need and your monthly deposits. That way we can match you with the right option first time. Prefer to explore first? Our 2-minute funding profile ranks your options and shows what to prepare. You can also read how unsecured business loans work for trading businesses without property.

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