New Zealand: Commercial property as an investment option? Five top tips.

With the increasing cost of residential property making rental returns in the short term less attractive, as well as proposed restrictions on who can buy, some investors are now looking to commercial property as an alternative.

In this article, we provide you with 5 top tips as to what you need to consider if you are looking to invest in commercial property.


The old adage of "Location, Location, Location" rings through even more so when you are looking at commercial property. You need to have a good understanding of the area in which the property is located as you need to consider the types of tenants that you might attract. Is it in a well-established area where there is already good leasing stock? Perhaps it is an up and coming area where you could buy in at a cheaper rate and attract solid tenants in the future with the rise in popularity of the area? What are the surrounding buildings like and who leases them? Other issues you will need to consider is the zoning of the area and how accessible it is from a roading and traffic point of view. What the future plans for this area and how will they impact on your investment?

Cavell Leitch acts for a variety of landlord and tenants throughout New Zealand. We'd be happy to discuss what we're seeing in the market to make sure you're considering all the factors.


As with any property purchase, a pre-purchase inspection by a suitably qualified professional of the building and chattels is essential. With commercial property you will also need to consider the following:

  • Structural integrity/strength of the building

It may be prudent to commission your own engineering report (or have the vendor's report assigned to you on settlement) indicating what % New Building Standards (NBS) the building is. This is important so that you are aware of the requirements and timeframe imposed by the relevant Council to upgrade the building to at least 34% NBS if applicable, but also so that you have this information ready to provide to any tenants who request it. You can read further about the earthquake-prone building legislation here.

In addition, your lender may wish to approve the engineering report before they confirm finance is available. You should also be aware that it is becoming more difficult to source commercial property finance from Banks these days, especially for buildings that are below 67% NBS.

  • Asbestos

A further issue to consider with commercial buildings is whether there is asbestos present in the building. Because of the new Health and Safety regulations, you will need to be fully aware of the extent of an asbestos and consider the costs associated with the ongoing compliance with these health and safety requirements. The presence of asbestos can also be off-putting for Tenants.

  • Earthquake repairs

If the property is located in Canterbury or the Upper South Island/Wellington areas then we recommend that you make enquiries as to whether there has been any damage in the recent earthquake sequence? If so, you may wish to engage a builder or an engineer to confirm that the repairs have been carried out to a good standard, You'd also want to request a copy of the scope, all sign-offs and transfer of warranties. EQC does not cover commercial buildings and insurance claims are not usually able to be assigned to a new owner. Your insurer may require details of the past claims before they confirm that they will offer cover for the building.


  • Owner Occupier

Will you be an owner-occupier of all or some part of the property? If so will the building meet the future as well as current needs of your business? Alternatively, if you would need to upgrade the building, then have you considered whether you will require building or resource consents and factored in the cost of any work?

If you are looking to undertake building work Cavell Leitch's expert construction team can help guide you through the building process.

  • Tenants

If the building is leased currently, what are the quality of tenants? You will need to fully research each tenant and consider the current rent and term left on each lease. Valuation advice is key in considering if the yield currently being earned is below, above or at market level. A key way in which commercial buildings appreciate in value is through rental growth. If the current rent is above market you may not see any rental growth for some time. Are the leases currently guaranteed and if so by whom and how strong is the guarantee? What are the current outgoings, are they likely to increase in the short term? Are these paid by the Landlord or the tenant under the Lease?

Car parking is an increased issue for tenants and for their customers. You will need to ascertain how many car parks come with the building? In a multi-tenanted building, how are they allocated and is this arrangement working well? What state are the car parks in and is any maintenance required or planned?

We would be happy to check any lease documents before you commit yourself so you know what you are getting into. If you're looking to enter into any lease agreements, then we have some tips for you to consider here.


Commercial properties can come in many forms, the most common being freehold or unit titles. Unit title developments can be complex in that you and your tenants will need to follow the body corporate's rules.

If you are considering purchasing in a unit title development then it would be a good idea to fully understand the body corporate's structure, particularly how its voting system works. You can also request copies of the minutes of previous body corporate meetings to ascertain whether there are any ongoing issues with the building or any unresolved disputes between the other owners of the development.

We appreciate that the unit title ownership structure can appear to be confusing at the outset. This does not mean that they do not provide very good investment opportunities. Cavell Leitch's property team has experience and expertise in unit titles, and we can help you understand how your particular development will operate.


Will you manage the property yourself or will you employ a property manager? Multi-tenanted commercial properties, in particular, can require lots of time and experience to manage properly. There are many great property managers out there who can assist, and we'd be happy to provide you with a recommendation. We can also help you draft your lease documents in a way that some of the property management costs can be passed onto your tenants.

The more homework you do prior to making the decision to invest, the more likely it is that your investment will be successful. Cavell Leitch has a wide variety experience in carrying out comprehensive due diligence investigations on behalf of our clients, whether the project is large and small.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions