Warehouse outgoings and running costs: what an owner actually pays

By Brenscot Builders | Last reviewed September 2026

Most people buying or building an industrial warehouse model the purchase or build cost carefully and the holding cost loosely. That is the wrong way round. The build is a single event. The outgoings run for as long as you own the building, and they are the difference between a gross rent that looks attractive and a net return that does not.

This article sets out what the outgoings are, who normally pays them, and the design decisions that change them permanently.

The short answer

In a typical industrial lease the tenant pays the outgoings on top of the rent, so the owner's net return is close to the headline rent. But "typical" is not law. Industrial leases in Queensland are a matter of contract, not statute, so what the tenant pays is whatever the lease says. The owner is always left with structural repair, capital replacement, and the cost of vacancy. Design decisions made before construction — roof, slab, drainage, services metering — set the running cost for the life of the asset.

The outgoings, one at a time

Council rates. Levied by the local government on the rateable value of the land. Industrial land is usually in a differential rating category of its own, and the rate in the dollar differs between Brisbane City Council and Moreton Bay City Council. Rates are recoverable from a tenant under most commercial leases.

Land tax. A Queensland state tax assessed annually by the Queensland Revenue Office on the total taxable value of the land you own in Queensland at midnight on 30 June, with a threshold below which no tax is payable and different thresholds and rates for individuals, companies and trustees. It is assessed on your whole Queensland landholding, not on each property separately, so the tax attributable to a new warehouse depends on what else you already own. That is the single most commonly misunderstood outgoing, and the one most often left out of a feasibility.

Building insurance. Insuring the structure, not the tenant's stock or plant. Industrial premiums are driven by construction type, fire services, occupancy and location. A combustible-clad building housing a combustible occupancy will be rated differently to a concrete building with sprinklers. See tilt panel, dado wall or steel cladding and fire services.

Water and sewerage. In the Brisbane and Moreton Bay areas these are billed by Urban Utilities or Unitywater, split between fixed service charges and consumption. Where a building is subdivided into tenancies without separate meters, the owner receives one bill and has to apportion it.

Electricity. For the common areas and, in a single-tenancy building, sometimes for the whole site. Where a building has a single connection serving multiple tenancies, the owner becomes an on-seller of electricity, which carries its own obligations. Separate metering at construction avoids this entirely. See power supply and Energex connection.

Body corporate levies. If the building is a lot in a community titles scheme — most multi-unit industrial estates are — the lot owner pays administrative fund and sinking fund levies set by the body corporate under the Body Corporate and Community Management Act 1997. These cover the common property: driveways, common lighting, common drainage, insurance of the scheme, and sinking fund provisioning for eventual replacement. See industrial units and community titles.

Fire services maintenance and testing. Hydrants, hose reels, sprinklers, extinguishers, alarms and emergency lighting all require scheduled inspection and testing under the Queensland Development Code and the relevant Australian Standards. The more fire services the building has, the higher the ongoing cost. This is one of the real reasons to design a building that does not need sprinklers if it does not need them. See fire walls and fire compartments.

Grounds, cleaning, pest and general maintenance. Landscaping, line marking, gutter clearing, detention basin and stormwater device maintenance, roller door servicing. Individually small, collectively not.

Management. If you use an agent to manage the lease, a percentage of rent.

Who pays: the lease structure

Queensland commercial leases are usually described as net, semi-gross or gross.

Under a net lease, the tenant pays rent plus all recoverable outgoings. The owner's return is close to the face rent. This is the standard structure for a single-tenant industrial building and what most industrial valuations assume.

Under a gross lease, the tenant pays one figure and the owner absorbs the outgoings. Any increase in rates, land tax or insurance comes out of the owner's return between reviews.

Semi-gross sits between: the owner absorbs outgoings up to a base year amount and the tenant pays increases above it.

Retail shop leases in Queensland are regulated by the Retail Shop Leases Act 1994, which restricts what a lessor may recover and imposes disclosure obligations. Industrial warehouse leases generally fall outside that Act, which means there is far more freedom in what can be agreed — and correspondingly more weight on getting the lease drafted properly. Have a property solicitor draft or review it. Do not use a template.

What the owner always pays

No lease structure transfers these:

A sinking-fund habit — setting aside a proportion of net rent against capital replacement — is what separates an industrial holding that performs over twenty years from one that surprises its owner in year twelve.

Design decisions that change outgoings permanently

This is the part that matters if you are building rather than buying.

Separate metering of every tenancy. Power, water and, where relevant, gas. The cost at construction is modest. The cost of retrofitting it, or of administering shared bills for twenty years, is not. This is the single highest-return decision on the list.

Roof material, pitch and gutter sizing. Undersized gutters and box gutters that overflow cause damage, insurance claims and tenant disputes. Generous gutter and downpipe sizing is cheap during construction.

Roof access and safety systems. Anchor points, walkways and guardrails installed during construction cost a fraction of what an access system costs later, and their absence makes every gutter clean and every solar inspection a height-safety exercise.

Slab design. A slab designed for the actual loads, with properly detailed joints and a sensible surface finish, avoids the joint spalling and cracking that becomes a recurring maintenance item and a source of tenant complaint.

Stormwater devices. Some water quality treatment devices need frequent servicing; others are largely passive. The device chosen at design stage commits the owner to that servicing regime for the life of the approval. See stormwater management.

Fire services scope. Designing within the thresholds that avoid sprinklers, where the intended use allows it, removes a permanent testing and maintenance obligation. Designing a building that will need sprinklers the moment a tenant racks goods high is a different decision, and should be made deliberately. See racking and fire requirements.

Materials and finishes. Colorbond over painted steel, concrete over gravel, LED over fluorescent. Every one of these is a small capital increase against a recurring operating cost.

How to think about it in a feasibility

Model the net return, not the gross. That means: rent, less any outgoings the lease does not recover, less a vacancy allowance, less a capital replacement provision, less management. Then test it — what happens to the return if land tax rises because you buy a second property, if the building is vacant for six months, if insurance premiums move.

An owner who has done that will make different design decisions to one who has not, and the differences all show up at construction stage, where they are cheap.

Frequently asked questions

Can I pass land tax on to an industrial tenant in Queensland?

In an industrial lease that falls outside the Retail Shop Leases Act 1994, what outgoings the tenant pays is a matter of what the lease says. Many industrial leases do recover land tax. Whether yours does depends entirely on its drafting — have a property solicitor confirm it before you rely on it.

What is the difference between a net and a gross lease?

Under a net lease the tenant pays rent plus the recoverable outgoings. Under a gross lease the tenant pays a single figure and the owner absorbs the outgoings, wearing any increases between rent reviews.

Who pays for the roof if it leaks?

Normally the owner, as structural repair, unless the lease expressly shifts it. Leaks caused by a tenant's works or by failure to maintain gutters are a different question and a common source of dispute, which is why the repair and maintenance clause is worth reading closely.

Are body corporate levies an outgoing the tenant pays?

In most industrial leases of a lot in a community titles scheme, administrative fund levies are recoverable from the tenant and sinking fund levies are not, on the basis that the sinking fund is capital. Again, it depends on the lease.

Do I need sprinklers, and what does that cost me every year?

Whether sprinklers are required depends on the building's fire compartment size and volume and on what is stored in it and how high. If they are required, they bring a permanent inspection, testing and maintenance obligation. Getting the design and the intended use considered together, early, is how that decision gets made properly.

Sources

General information only

This article is general information, current as at September 2026. It is not legal, tax, financial or valuation advice. Lease terms, rating categories and tax thresholds change. Obtain advice from a property solicitor, your accountant and a registered valuer before relying on any of it.

Planning an industrial warehouse?

Talk to Brenscot about your site or your requirements. Call 0480 800 077, email enquiries@brenscot.com.au, or start an enquiry. You can also read how we work.