Renewal versus relocation is a modelling problem before it is a negotiation problem. Relocation looks expensive because the capex is visible; renewal looks cheap because the cost of staying put is hidden. The two land closer than either party admits, and a credible relocation option is worth more than the move itself.
Every three to seven years the same decision arrives: the lease is expiring, the landlord is offering to renew, and there is space available elsewhere.
Most tenants default to renewal because it looks cheaper, and landlords price accordingly. Making the call means modelling both options against the same numbers.
The visible cost of relocation.
What everyone sees:
- Fitout. $1,200–$2,500 per square metre for professional office space in Australian capitals in 2026.
- Moving. Physical move, IT re-cabling, furniture transport, permits, insurance. $80–$200 per employee.
- Make-good on the current lease. $150–$500 per square metre for full restoration.
- Downtime. Days or weeks of reduced capacity during the move.
- Rebranding of address across websites, stationery, systems, integrations.
That adds to $500k–$2M+ for a mid-sized occupier, and it is not the whole picture.
The invisible cost of renewal.
What most renewal calculations leave out:
- The renewal premium. Renewal offers typically sit 8–20% above market rent. On a lease at $500k p.a., a 12% premium is $60k a year, $300k across five years.
- Fitout obsolescence. A five-year-old fitout carries either a refresh cost or the productivity cost of working around a dated space.
- The "we made do" tax. Businesses adapt to their space then forget they have adapted. Space that suited 40 staff is compromised at 65, and renewal locks that in.
- Incentive foregone. New leases in most Australian markets carry 15–35% rent-free or fitout contribution; renewal rarely does. On a $500k p.a. lease, 25% is worth around $625k gross over five years.
The five-part model.
The proper comparison runs five columns:
- NPV of renewal rent, net of renewal incentive, over the proposed term.
- NPV of relocation rent, net of new-lease incentives, over the same term.
- One-off transition costs: fitout, move, make-good, downtime.
- Operational uplift or cost of the new space.
- Risk-weighted value of the optionality either choice preserves or forfeits.
The comparison is not which is cheaper this year, but the total cost of each, discounted to today, across the term you would actually run it.
Where the numbers usually land.
Three patterns show up across engagements.
Small tenancies (under 500m²). Transition costs are proportionally high, incentive on offer proportionally low. Renewal, negotiated properly, is usually the answer.
Mid-sized tenancies (500–3,000m²). The two sit close. Which wins turns on market conditions, the landlord's position and the renewal premium being asked.
Large tenancies (3,000m²+). New-lease incentive scales up and transition costs scale down proportionally. Relocation often becomes competitive, and in some markets wins.
The credible-alternative premium.
Even when relocation isn't the answer, modelling it is worth money at renewal. Landlords negotiate differently with a tenant holding a written cost comparison of five buildings than with one who says they'll probably just renew. The alternative doesn't need to be chosen, only credible.
How to run this properly.
Six to twelve months before expiry, do three things.
Get a written market benchmark. Know what rent looks like in your grade and precinct. Not asking rent; transaction rent.
Model three to five relocation alternatives. Real buildings, real available floors, real quoted rents, full cost comparison including transition.
Then open the renewal conversation. The landlord prices against whatever they think your alternative is. Making it concrete usually moves the number.