New Commercial Lease vs Existing Lease: Costs and Finance
The new commercial lease vs existing lease decision changes where and when cash is spent, but neither pathway removes premises or opening risk.
New premises may provide a purpose-designed site and newly negotiated terms. Taking over an existing lease may offer faster trading, an established fit-out and immediate customer continuity. The comparison should consider whole-of-project cash flow, legal tenure, physical condition and finance—not only starting rent or the apparent saving on fit-out.
New commercial lease vs existing lease: the short answer
Compare total cost through opening and the full lease term.
Assess fit-out condition and future refurbishment, not appearance alone.
Model downtime, revenue ramp-up and inherited obligations.
Coordinate landlord, transaction and finance approvals.
New premises: control and opening risk
A new lease may allow negotiation of term, incentives, permitted use and design. However, the business relies on planning, approvals, construction, equipment delivery, recruitment and customer acquisition. Deposits and rent may be payable before revenue. Delays can consume incentives and working capital, so the forecast should include a realistic ramp-up and contingency.
Existing lease: continuity and inherited constraints
An assignment may preserve location, staff routines, customer access and a functioning fit-out. The buyer inherits the remaining term, review schedule, condition and practical limitations. Landlord consent is commonly required. Confirm arrears, breaches, option rights, incentive treatment and whether the landlord will require variations or new security.
Fit-out, equipment and refurbishment
New works can be expensive but designed for the buyer's model. Existing improvements may reduce upfront cost while hiding maintenance, compliance or replacement needs. Identify ownership and finance over equipment, obtain condition information and review make-good. Allow for refurbishment required by the landlord, franchisor or buyer's operating standards.
Incentives, assignment costs and timing
A new lease may offer rent-free time or a landlord contribution, subject to conditions and reimbursement timing. Assignment can involve consent fees, legal work, guarantees and due-diligence costs. Compare effective whole-of-term cost and the date each payment occurs. An incentive does not automatically overcome higher rent or a poor site.
Working capital and finance assessment
A greenfield site relies more heavily on forecasts, contribution and cash reserves. An operating site may provide trading history, but results need adjustment for the buyer's rent, debt and planned changes. Lenders may assess fit-out, equipment and working capital differently. Under both pathways, sustainable cash flow and workable tenure remain central.
Questions to ask before committing
What evidence supports the rent, cost and revenue assumptions?
Which approvals, consents, notices and security must be in place?
What changes under a delayed-opening, weaker-sales or early-exit scenario?
Which matters require legal, accounting, tax, valuation or technical advice?
Frequently asked questions
Is an existing lease always easier to finance?
No. Weak tenure, high rent or poor condition can offset the benefit of trading history.
Do incentives make a new lease cheaper?
Not necessarily. Compare timing, conditions and whole-of-term effective cost.
Should existing fit-out be valued at replacement cost?
Not automatically. Condition, ownership, suitability, removal cost and remaining useful life matter.
Which pathway opens faster?
An existing site may, but consent, refurbishment and transaction conditions can still cause delays.
Illustrative side-by-side comparison
A new site may need a larger fit-out and six months of ramp-up, while an existing site requires assignment security and near-term equipment replacement. The new site might offer better tenure and incentives; the existing site might generate revenue sooner.
Put both pathways into monthly forecasts using the same sales and cost discipline. The decision can change when payment timing and downside scenarios are visible.
A consistent comparison checklist
For each option, record secure term, options, rent reviews, outgoings, incentive, deposit or guarantee, fit-out, approvals, opening date, equipment condition, working capital, make-good and exit flexibility. Mark costs as verified, quoted or estimated.
Compare the cash remaining after opening, not only total project cost, because resilience often depends on liquidity once unexpected events occur.
Decision and adviser coordination
A lawyer reviews the lease or assignment and landlord conditions. Technical advisers assess fit-out and building condition. The accountant tests forecasts and tax consequences. The broker considers possible funding structures and evidence.
The owner then weighs operating suitability, customer impact and execution capacity. A coherent comparison uses the same assumptions across all advisers and records which risks remain accepted.
Conclusion
The better comparison is not new versus existing in the abstract. It is which documented pathway leaves the business with suitable premises, manageable obligations and enough cash to operate.
Considering Commercial Premises?
Discuss how the premises commitment and proposed finance could be assessed together.
General information only. This article does not constitute financial, credit, legal, tax, accounting, compliance or valuation advice. Finance is subject to lender approval, eligibility criteria, terms, fees and conditions. Consider obtaining independent professional advice for your circumstances before acting.
