How to negotiate a retail lease renewal before expiry

Most retail tenants wait until the lease expiry is looming before they think about renewal. By then, the landlord has the upper hand. Starting the conversation 12–18 months before expiry shifts the balance back to you. It gives you time to gather data, explore alternatives, and negotiate from a position of strength.

Why renew early?

Early renewal negotiations let you lock in terms before the market moves. If rents in your precinct are rising, securing a new lease now can cap future increases. If the landlord is keen to retain you, they may offer incentives—rent-free periods, fit-out contributions, or reduced outgoings—that disappear once the lease is close to expiry.

It also removes uncertainty. A long-term lease with fixed or capped rent reviews gives you stability to plan inventory, staffing, and marketing. Without it, you risk a last-minute scramble to relocate or accept unfavourable terms.

When to start the conversation

Check your lease for the renewal notice period. Most retail leases in Victoria require you to notify the landlord 6–12 months before expiry if you want to exercise an option. If there’s no option, start discussions 12–18 months out. This timing gives you room to negotiate without being rushed.

If your lease is governed by the Retail Leases Act 2003 (Vic), the landlord must provide a disclosure statement at least 6 months before expiry. Use this as a trigger to begin negotiations. If they don’t provide it, the lease may automatically renew on the same terms—so don’t assume silence means you’re safe.

How to prepare for negotiations

Gather your data

Landlords respond to facts, not emotions. Before you approach them, collect:

• Your current rent and outgoings as a percentage of turnover.
• Recent sales data to show your performance.
• Comparable rents for similar spaces in the same precinct.
• Any issues with the premises—maintenance, foot traffic, parking—that affect your business.

If your rent is already high relative to turnover, use this to argue for a reduction or a turnover rent component. If the landlord has neglected repairs, document it and push for a rent abatement or a contribution to fixes.

Assess your alternatives

Even if you want to stay, knowing your options strengthens your position. Research vacancy rates in the area, talk to other tenants about their experiences, and get a sense of what’s available. If there’s high demand for your space, the landlord may be more flexible. If vacancies are rising, they may offer incentives to keep you.

If you’re considering relocating, factor in the costs—fit-out, downtime, marketing to attract customers to the new location. Sometimes staying is cheaper, even with a rent increase.

What to negotiate

Rent and rent reviews

The biggest sticking point is usually rent. Landlords often push for market reviews, but these can be unpredictable. Instead, negotiate:

• A fixed annual increase (e.g., 3–4%) to avoid market spikes.
• A turnover rent component, where you pay a base rent plus a percentage of sales above a threshold.
• A cap on market reviews, so the rent can’t exceed a certain percentage of turnover.

If the landlord insists on a market review, ask for a ratchet clause—where the rent can’t go below the current rate. This protects you if market rents fall.

Lease term and options

A longer lease gives you stability but reduces flexibility. A shorter lease with multiple options lets you reassess terms more frequently. Aim for a 3–5 year term with at least one option to renew. If the landlord resists, ask for a break clause that lets you exit early if sales drop below a certain level.

Outgoings and make good

Outgoings—like council rates, insurance, and maintenance—can add 20–30% to your rent. Negotiate to cap increases or exclude certain costs (e.g., capital works). If the landlord wants you to repaint or replace flooring at the end of the lease, push back. The Retail Leases Act 2003 (Vic) limits make good obligations, so get advice from your solicitor on what’s reasonable.

Incentives

Landlords often offer incentives to secure long-term tenants. These might include:

• Rent-free periods (e.g., 3–6 months).
• Fit-out contributions (e.g., $50–$100 per square metre).
• Reduced outgoings for the first year.
• Marketing support (e.g., centre-wide promotions).

If the landlord won’t budge on rent, ask for incentives instead. A rent-free period can offset a higher rent over the lease term.

How to handle the negotiation

Start with a written proposal

Don’t rely on verbal discussions. Put your requests in writing—this shows you’re serious and gives the landlord something to respond to. Keep it professional and factual. For example:

• “Based on our sales data, we propose a 3% fixed annual rent increase for the next 5 years.”
• “We request a 6-month rent-free period to offset the cost of relocating our fit-out.”
• “We seek a turnover rent component of 5% above a $X threshold.”

Be prepared to walk away

If the landlord won’t meet your key terms, be ready to explore other options. This doesn’t mean you have to leave—often, the landlord will come back with a better offer once they realise you’re serious about alternatives. If you do decide to relocate, give yourself enough time to find a new space, negotiate a lease, and move without disrupting your business.

Get everything in writing

Once you’ve agreed on terms, the landlord should provide a new lease or a deed of variation. Don’t sign anything without reviewing it with your solicitor. The Retail Leases Act 2003 (Vic) requires certain disclosures, and the lease must comply with the Act. If it doesn’t, you may have grounds to challenge it later.

What if the landlord refuses to negotiate?

If the landlord won’t engage in discussions, you have a few options:

• Exercise your option (if you have one) and negotiate later. This buys you time to find alternatives.
• Request a market rent review through VCAT if you believe the rent is too high.
• Start looking for a new location while continuing to pay rent month-to-month (if your lease allows it).

If you’re in a shopping centre, the landlord may be more open to negotiation if you’re a strong tenant (high turnover, good reputation). If you’re in strip retail, they may be less flexible, especially if the area is gentrifying and they can attract a higher-paying tenant.

Remember, the landlord wants to avoid vacancy as much as you want to avoid moving. Use this to your advantage, but don’t overplay your hand—be realistic about what you can achieve.

Frequently asked questions

Talk to a Melbourne retail leasing consultant

Elite Retail Leasing acts for retail tenants across Australia on new sites, renewals, lease negotiations, surrenders and expansion planning. If any of the above applies to your business, get in touch.

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