Landlord incentives are one of the most talked-about parts of a lease negotiation, and one of the least understood. Tenants often focus on the headline number without checking what’s attached to it. Here’s what to look for.

What counts as an incentive

An incentive is anything a landlord offers on top of the base lease terms to secure a tenant. The most common forms:

• Rent-free period. A number of months with no rent payable, usually at the start of the lease.
• Fitout contribution. A cash contribution, or a landlord-funded fitout, to help cover the cost of preparing the premises for your business.
• Rent abatement. A reduced (not free) rent for a set period.
• Signage or naming rights. Less common, but relevant where street visibility matters.

The catch: incentive clawback

This is the part tenants most often miss. Many incentives come with a clawback clause – if you exit the lease early, the landlord can require you to repay some or all of the incentive, often on a sliding scale that reduces over the term. Before you sign:

• Ask directly whether a clawback applies, and get the mechanism in writing.
• Understand how it reduces over time – does it disappear after year three of a five-year term, or apply in full right up to expiry?

How incentives are structured

Incentives are usually negotiated as a percentage of the total rent payable over the lease term – a common shorthand is “X months incentive over a Y-year term.” This makes different offers easier to compare, rather than just looking at the headline rent-free period.

Local context: Canberra vs Sydney

Sydney: Incentive levels in Sydney’s CBD and fringe markets have historically run higher, reflecting a more competitive leasing environment and higher face rents. Both the headline incentive and the clawback exposure tend to be larger in dollar terms. Benchmark any offer against recent comparable deals in the same precinct.

Canberra: Incentives here tend to be more conservative, partly reflecting a tenant base heavily influenced by government occupiers, who typically negotiate on more standardised terms. Incentive negotiation is still achievable for private-sector tenants – just less of a given than in Sydney’s more competitive submarkets.

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