How to Invest in Commercial Property in NZ
Published
Written by Mark de Groot-McKenzie · Head of Strategy and Partnerships, Orange Network
Reviewed by Chad Weber · Head of Lending
To invest in commercial property in NZ: decide whether you are buying for yield, capital growth, or a premises your own business will occupy; arrange finance against the property and its lease — most commercial loans need a substantially larger deposit than a home loan; then do due diligence on the tenant, the lease, and the building with your lawyer, accountant, and valuer before you go unconditional. The lease is the income. You are buying the lease as much as the building.
How commercial differs from a residential rental
A residential rental is assessed mainly on you and the rent. A commercial investment is assessed on the tenant's strength, the remaining lease term and rights of renewal, who pays the outgoings, and the property itself. Tenants are often responsible for rates, insurance, and maintenance under the lease, which changes the return — and a vacant commercial property can stay vacant far longer than a house. Lenders price that risk into the deposit and the rate.
The steps
- Set the strategy: standalone investment, multi-tenant, or owner-occupied premises for your own business
- Get a finance indication early, based on the likely deposit and the lease profile lenders will accept
- Assess the lease: term remaining, renewals, rent reviews, outgoings, and the tenant's trading history
- Commission a registered valuation — commercial value turns on lease income and yield, not comparable house sales
- Due diligence with your lawyer and accountant: title, zoning, seismic and building compliance, body corporate if any, and the entity you will buy in
- Settle the finance structure: term, interest-only period if any, and how this property sits with the rest of what you own
What the deposit usually looks like
There is no single commercial deposit figure. Owner-occupied premises are assessed differently from a leased investment, and a strong tenant on a long lease is a different proposition from a short lease on a secondary street. Expect the deposit to be materially larger than for a home, and expect the lender to be chosen around the property rather than the other way round. We work that number out against real lenders before you commit to a property.
Who needs to be on the file
Your accountant on entity and tax structure, your lawyer on the lease and the agreement, a registered valuer on the commercial value, and an adviser on the lending. Orange Network is that last part — we compare the banks with an appetite for the property in front of you. We are not a substitute for the other three, and we will introduce them from our network if you do not have them.
This is general information, not personalised financial advice or a recommendation to buy any property. Commercial lending through Orange Network is arranged with lenders on our panel; bring the property, or the plan for one, and we will price the finance honestly.
