Commercial Lease Calculator — United Kingdom 2026-27
Comparing lease options? See the true cost.
Model the real cost of a UK commercial lease across shop, office, or industrial space. Include rent reviews, service charge, VAT, rent-free incentives, dilapidations exposure, and affordability against turnover.
United Kingdom Commercial Lease Notes
UK commercial leases are heavily shaped by service charge, VAT treatment, rent review wording, and dilapidations risk at lease end. A rent-free period can still be expensive once fitout spend and repairing obligations are included.
This version is tuned to UK leasing decisions, where occupiers compare service-charge exposure, turnover pressure, lease length, and repair liabilities before committing to a unit.
UK-specific treatment for commercial lease: figures are framed in pounds, with British household or business wording and the assumptions commonly seen in PAYE, HMRC, mortgage, pension, and consumer-credit contexts.
Watch for UK markers in the page copy and inputs: HMRC, PAYE, National Insurance, pension contributions, stamp duty land tax, miles, APR, part-exchange, council tax, VAT, and GBP-based totals.
The result should be read as a United Kingdom estimate, so compare it with UK provider quotes, HMRC or GOV.UK guidance, lender affordability rules, devolved-nation differences, or regulated advice where needed.
Always engage a commercial lawyer and tenant advocate before signing a commercial lease. This calculator provides estimates for planning purposes only.
Gross vs net vs semi-gross commercial leases in the United Kingdom
The three structures you will encounter
UK commercial and retail leases fall into three broad rent structures. The differences matter because they determine who pays for building outgoings, and who wears the risk of cost inflation over the term.
| Lease type | Tenant pays | Landlord pays | Common use |
|---|---|---|---|
| Gross | Fixed rent only | All outgoings (business rates, insurance, management) | Smaller suites, serviced or multi-let buildings |
| Internal repairing (IRI) | Rent + internal repairs + service charge | Structure, exterior and roof | Shorter leases, parts of multi-let offices |
| FRI (full repairing & insuring) | Rent + all repairs + reimburses insurance | Little or nothing | Most UK institutional office, retail and industrial leases |
The FRI lease dominates the UK
The full repairing and insuring (FRI) lease is the UK default for institutional landlords: the tenant carries the full repairing burden and reimburses the building insurance premium. On a multi-let building this is delivered through a service charge, so check the service-charge cap and the RICS Service Charge Code before signing. Always read the repairing covenant and any schedule of condition — they decide who funds dilapidations at lease end.
Typical commercial lease outgoings breakdown
Outgoings typically add 15–35% to gross occupancy cost
Outgoings are the costs of running the building that a net lease passes through to the tenant — usually a significant add-on to the headline rent. They are invoiced periodically on an estimated basis with an annual reconciliation. The tenant proportion is normally calculated by lettable area (tenancy NLA ÷ building NLA).
| Outgoing | Typical share of total | Notes |
|---|---|---|
| Business rates | 20–35% | Set by the rateable value; reliefs may apply |
| Building insurance | 5–10% | Reimbursed to landlord under an FRI lease |
| Repairs & maintenance | 15–25% | Plant, roof and structure on multi-let buildings |
| Cleaning | 10–15% | Common areas |
| Management fee | 5–10% | Typically 3–5% of the service-charge spend |
| Lifts, HVAC, fire services | 15–25% | Larger share in high-rise |
| Security | 5–10% | City-centre buildings only |
The service-charge budget vs actual reconciliation
At the start of each year the landlord issues a service-charge budget; at year-end a certified statement reconciles actual spend, and the tenant receives a credit or a balancing invoice. The RICS Professional Statement, Service charges in commercial property, sets the standard for transparency and fair apportionment. Challenging inflated management fees, sinking-fund contributions, or capital improvements dressed up as 'repairs' is a common source of negotiation.
UK commercial lease framework and security of tenure
The Landlord and Tenant Act 1954 sits behind every business lease
In England & Wales there is no retail-specific statute. Business tenancies are governed by the lease contract and the Landlord and Tenant Act 1954 (Part II), which gives most business tenants security of tenure — the right to renew at the end of the term unless the landlord can rely on a statutory ground. A lease can be "contracted out" of the 1954 Act, but only if the landlord serves the statutory warning notice and the tenant makes the required declaration before completion. Scotland and Northern Ireland have their own separate regimes, so check which jurisdiction governs the premises.
| Lease feature | What it means | Watch for |
|---|---|---|
| Security of tenure (LTA 1954) | Statutory right to a new lease at expiry | Whether the lease is "contracted out" |
| Rent review | Usually open-market and upward-only | Upward-only ratchets that can't fall with the market |
| Repairing obligations | FRI leases place full repair on the tenant | Agree a schedule of condition to cap dilapidations |
| Break clause | Right to end the lease early on notice | Strict conditions — vacant possession, rent paid up |
| Alienation | Assignment / subletting rights | Landlord consent, AGAs and guarantor terms |
The RICS Code for Leasing Business Premises
The RICS Code for Leasing Business Premises (a mandatory professional statement for RICS members) sets out fair negotiating practice: heads of terms should be in writing and state whether the lease is contracted out, what the rent-review basis is, and how the service charge is apportioned. Take advice from a solicitor and a chartered surveyor before committing — a heavily negotiated repairing covenant or break clause can be worth more than the headline rent over the term.
UK commercial market rents by city and grade 2025
Prime office — net face rents per square metre
Face rents below are approximate prime net annual rents per m² sourced from JLL, CBRE, Colliers and Knight Frank 2024 Q4 / 2025 Q1 research. They exclude incentives, which remain elevated post-COVID — typical Central London prime incentive packages run 24–30 months rent-free on a 10-year term.
| Market | Prime £/m² | Grade A £/m² | Secondary £/m² |
|---|---|---|---|
| London (West End) | £1,600 | £1,150 | £700 |
| London (City) | £900 | £720 | £480 |
| Manchester | £430 | £360 | £250 |
| Birmingham | £430 | £350 | £240 |
| Leeds / Bristol | £400 | £330 | £220 |
Regional and industrial
Out-of-town and regional offices typically sit at 55–70% of city-centre Grade A net face rents. Prime industrial and logistics around the M25 and the "Golden Triangle" of the East Midlands now commands £130–£230/m² net for modern big-box units — up sharply on the back of e-commerce demand. Prime retail varies hugely: a flagship pitch on a major high street can far exceed a secondary parade in the same town.
Make-good obligations at end of lease
Standard vs strict make-good
'Make-good' is the tenant's obligation to return the premises to a defined state at end of lease. There are two common UK formulations: Standard make-good returns the premises in the condition documented at lease commencement (the condition report), allowing for fair wear and tear. Strict make-good (sometimes called 'base-building' make-good) requires the tenant to remove all fit-out, partitions, cabling, signage and carpet — leaving a clear base-building shell. Strict make-good on a 500 m² office can cost £60,000–£120,000; on a large retail tenancy, much more.
Negotiating a cap or a cash settlement
Tenants should push for one of: (a) a capped make-good obligation (£X per m²), (b) a cash settlement alternative that lets the landlord absorb make-good in an outgoing refurbishment, or (c) a 'back-to-grey' clause that allows the fit-out to remain if the incoming tenant accepts it. Where the landlord intends to refurbish anyway, insisting on strict make-good has been held to be unconscionable by tribunals in some cases.
Condition report and dilapidations
A dated, photographed condition report signed at commencement is the single most valuable make-good evidence. Without it, disputes fall back to the lease wording alone — often favouring the landlord. The RICS publishes professional guidance on dilapidations, and the Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property governs how end-of-lease dilapidations disputes are run.
Where these figures come from
Business figures on this page are drawn from HMRC (business tax, VAT, PAYE), Companies House (company registration and director filings), and GOV.UK (employer obligations).
- Corporation Tax (19% small-profits rate / 25% main rate) — GOV.UK — Corporation Tax rates.
- VAT rules (20% standard rate, £90,000 registration threshold) — GOV.UK — How VAT works.
- PAYE & employer obligations — GOV.UK — PAYE for employers.
- Business registration (company number / UTR) — GOV.UK — Set up a business.
- Employer pay guidance — GOV.UK.
- Company & director filing rules — Companies House.
Last checked: April 2026. Rates and thresholds are reviewed against the source of record each November, when annual adjustments for the following tax year are published.
Select the question that matches where you are right now.
The total cost shows the full commitment over your lease term — base rent plus outgoings, compounded by annual rent reviews. The year-by-year chart shows how the gross rent escalates each year. The bond is a significant upfront cash requirement on top of the total lease cost.
The base rent figure in your lease is the net rent. Your actual outgoings are on top of this. Always compare commercial leases on a gross basis: add estimated outgoings to base rent for each year. Outgoings can vary significantly — request three years of audited actuals from the landlord, not just the landlord's budget estimate.
A 3% annual rent review seems small but compounds over time. Starting at £60,000/yr: Year 2 = £61,800, Year 3 = £63,654, Year 5 = £69,551. Over 5 years, you pay 5.3% more total rent than if rent stayed flat. At 5%/yr, the compounding effect is more significant. The year-by-year schedule chart makes this visible — the bars grow each year.
The bond (typically 3–6 months rent) must be funded before you open. It is not a cost — it is returned at lease end — but it locks up working capital for the full lease term. A 6-month bond on £60,000/yr = £30,000 tied up for 3 years. Factor this into your startup capital requirement. A bank guarantee avoids cash lockup but incurs a bank fee (typically 1–2% of the guarantee amount per year).
Rent-free periods and fitout contributions directly reduce your effective cost. Switch to Standard mode to enter these and see their impact on total cost and net annual rent.
A 3-month rent-free period on a £60,000/yr lease over 3 years: saves £15,000 upfront, effective annual rent = (£180,000 − £15,000) ÷ 3 = £55,000/yr. A fitout contribution of £50,000 over 3 years: effective annual saving = £16,667/yr. Combined, the effective net annual cost could be £38,333/yr vs the headline £60,000. Always calculate effective rent to compare incentive packages across different premises.
A fit-out contribution received from a landlord (a reverse premium) is typically a taxable receipt — you may have to pay tax on it. It may offset the capital cost of your fit-out, but the tax treatment depends on how the contribution is structured. Always seek advice from your accountant on the tax treatment of any fitout incentive before finalising the deal. The gross contribution is rarely the net benefit after tax.
A rent-free period typically means rent is free — but outgoings are usually still payable. On a £12,000/yr outgoings lease, a 3-month rent-free still costs £3,000 in outgoings during the free period. The saving is on rent only, not on the total gross cost. This is an important distinction when comparing rent-free periods: some leases offer "full incentive" (rent + outgoings free) vs "rent only free." Confirm which applies in the Heads of Agreement before proceeding.
Whether a lease is affordable depends on your business type and revenue. The rent-to-revenue ratio is the most reliable affordability indicator.
Retail businesses should not pay more than 10% of gross revenue in rent and outgoings. At £72,000/yr gross rent, you need £720,000/yr in revenue to stay within this threshold. This is a planning metric, not a guarantee of viability — margins vary significantly. A high-margin business (jewellery, luxury goods) may tolerate 12–15%. A low-margin business (newsagency, convenience) may need to be under 7%.
The monthly rent cost is a fixed outflow regardless of your revenue. In slow months, this is the most painful cost in the business. Before signing, model your monthly cashflow at 60%, 80%, and 100% of projected revenue — confirm you can service the rent obligation through slow periods without running out of cash. Many businesses fail in the first year due to inadequate working capital to cover fixed rent during ramp-up.
Day-one cash requirement = bond + first month rent + fitout costs + equipment + stock + 3 months operating reserve. For a £60,000/yr lease: bond £30,000 + month 1 £6,000 + fitout (self-funded, £50,000) + 3 months reserve (£18,000) = £104,000 minimum before opening. This is why commercial leases are often the largest single capital requirement when starting a business. Model this carefully before committing.
In 2026, vacancy rates in city-centre and out-of-town commercial markets give tenants more leverage than in previous years. Here is how to use it.
Before instructing lawyers, reach commercial agreement on key terms via a Heads of Agreement (HOA): base rent, rent-free period, fitout contribution, bond amount, review mechanism, option terms, and make-good provisions. The HOA is non-binding but sets expectations. Lawyers then document the agreed terms — reversing negotiated terms after lawyers are engaged is difficult and expensive.
Priority negotiation points: (1) Rent review mechanism — CPI or 3% fixed, whichever is lower; (2) Break clause at the midpoint of the term; (3) Assignment and subletting rights without requiring landlord consent; (4) Make-good limited to "fair wear and tear" with a monetary cap; (5) Personal guarantee cap — negotiate a dollar limit, not an unlimited guarantee; (6) Service-charge cap or exclusions (capital works, sinking-fund contributions).
A commercial lawyer review of the lease is essential — typically £1,500–£4,000 for a standard lease. This cost is trivial relative to a £227,000 three-year commitment. A specialist commercial tenant advocate can also negotiate on your behalf — often resulting in better incentives and lease terms than self-negotiation achieves. Many tenant advocates work on a no-win-no-fee or fixed-fee basis for smaller tenancies. The single most important thing you can do before signing is to get independent legal advice from a commercial lease specialist.