Key takeaways:

• Fit-out costs can range from $600 to over $2,500 per square metre in Australia, depending on your industry and design needs.
• Landlord contributions typically cover 10% to 30% of fit-out expenses in commercial leases but vary by location, vacancy rates and lease length.
• Financing a fit-out gives you more control and flexibility but can impact your cash flow and increase debt load.
• Negotiating landlord incentives reduces your upfront costs, but often comes with trade-offs like longer lease terms or limited design choices.
• Combining both options can offer balance: use finance for custom upgrades and landlord incentives for base build items.

Introduction

Setting up a new premises or refurbishing an existing one is an exciting milestone for your business. But with commercial fit-outs in Australia costing tens—or even hundreds—of thousands of dollars, the big question remains: should you finance your fit-out or negotiate a contribution from your landlord?

In this article, we’ll break down both options, outline the pros and cons, and help you make an informed decision that suits your growth strategy and financial situation. Whether you're opening a medical clinic in Melbourne or launching a retail store in Brisbane, you'll find actionable insights tailored to today's market.

Understanding fit-out costs in Australia

Fit-out costs vary widely depending on your industry, location, and specific requirements. Here’s a quick guide:

• Medical clinics: $1,500 to $2,500+ per sqm (due to strict compliance and equipment needs)
• Dental practices: $2,000 to $3,000+ per sqm (due to plumbing, cabinetry, radiation shielding, and sterilisation zones)
• Beauty and wellness clinics: $1,200 to $2,200 per sqm (factoring in aesthetic finishes, plumbing for treatment rooms, and client comfort)
• Retail stores: $800 to $1,800 per sqm (driven by shopfronts, lighting, and merchandising needs)
• Office spaces: $600 to $1,200 per sqm (based on layout, tech integration, and finishes)

According to the 2023 Savills Fit-Out Cost Guide, prices have risen 8% year-on-year due to labour shortages, rising material costs, and compliance updates across many states.

What are landlord contributions?

A landlord contribution (also known as a fit-out incentive or tenancy incentive) is a payment or benefit provided by your landlord to assist with fit-out costs. Common types include:

• Cash incentives: Direct funding towards fit-out works
• Rent-free periods: Months of reduced or zero rent while you complete works
• Landlord works: The landlord handles some or all of the base build

In Australia’s competitive commercial leasing market, especially in CBDs and business parks, landlords are increasingly offering contributions to attract tenants—particularly for leases of 5 years or longer.

Pros of negotiating landlord contributions:

• Reduces your upfront capital outlay
• Less debt or financing required
• Landlord may manage key build elements (saving time)

Cons:

• Might be tied to longer lease terms
• Limited control over works or specifications
• Incentive size often depends on the market or property demand

What about fit-out finance?

Fit-out finance refers to a commercial loan or leasing arrangement used to fund the design, construction, and furnishing of your premises. Options include:

• Unsecured business loans
• Fit-out specific finance packages from banks and lenders
• Equipment or asset finance for fixed items like cabinetry or tech

Benefits of financing your fit-out:

• Full control over your layout, design and timelines
• Spread costs over manageable instalments
• Can move quickly without waiting on landlord negotiations

Drawbacks:

• Increases debt on your balance sheet
• Interest and fees add to total fit-out cost
• Affects working capital and cash flow

Fit-out loans in Australia often range from $20,000 to $500,000, with terms from 1 to 5 years. As of early 2025, average interest rates range between 9% and 14% depending on loan type and security.

Which option is right for your business?

Here’s how to decide which path makes sense:

Consider landlord contributions if:

• You’re entering a long-term lease (5+ years)
• The landlord is motivated (e.g. high vacancy in the building)
• You’re happy with base-level finishes

Consider financing if:

• You need full creative control over your brand and layout
• Speed is essential and you don’t want to wait for landlord approvals
• Your business has strong cash flow and financing capacity

In many cases, a hybrid approach works best:

• Negotiate landlord contributions for base build or structural elements
• Finance your own additions like signage, furniture, or tech upgrades

Key tips for negotiating landlord contributions

• Research comparable rents and incentives in the area using commercial real estate sites
• Get multiple quotes for your fit-out to use as leverage in talks
• Ask for rent-free periods in addition to cash contributions
• Request landlord works (like HVAC, plumbing or partitions) to reduce your scope

Remember, landlords often factor incentives into their rent calculations—so always negotiate both the incentive and the rent.

Common FAQs

How much do landlords usually contribute to fit-outs in Australia?

Landlords typically contribute 10% to 30% of the total fit-out cost, depending on market demand, lease length and property location.

Is financing a fit-out tax deductible?

Yes. In most cases, the interest on fit-out loans and depreciation on assets may be deductible—consult your accountant to confirm.

Can I use equipment finance for a fit-out?

Yes, equipment or asset finance can fund fixed installations like cabinetry, dental chairs, POS systems or IT infrastructure.

Can I combine landlord contributions and financing?

Absolutely. Many businesses use landlord funds for basic construction and finance the rest to create a customised, branded space.

What happens if I leave before the lease ends?

You may need to repay part of the landlord incentive or continue lease payments. Always check your lease terms.

Conclusion

Financing a fit-out and negotiating landlord contributions aren’t mutually exclusive—you can (and often should) consider both. Each approach has trade-offs, so think about your business goals, leasing timeframe, and funding capacity.

In the current Australian market, with rising construction costs and landlords more open to negotiation, businesses that plan ahead and leverage both options stand to gain the most.

Whether you're launching a new dental practice in Sydney or upgrading your office in Perth, getting the balance right could save you thousands—and set your business up for long-term success.