04/02/2026
Is now the right time to buy commercial property?
A broker’s perspective
By Krish Krishna, Mortgage Suite
It’s one of the questions I hear most often from business owners and investors: is now a good time to buy commercial property? After more than two decades helping clients navigate commercial lending, I’ve learnt that the answer is rarely straightforward. It depends on your circumstances, the type of property you’re considering, and whether you’ve done your homework.
Many business owners are discovering that their rental payments are higher than what their mortgage repayments would be if they owned the property outright.
That equation alone is prompting a lot of people to take a serious look at purchasing rather than continuing to lease.
Of course, lower interest rates only tell part of the story. The commercial property market has shifted considerably in recent years, and understanding those shifts is essential before making any decisions.
Not all commercial property is created equal
When it comes to commercial properties, the type of asset you’re buying matters enormously to lenders. Office buildings, for instance, have fallen out of favour with banks. The shift toward remote and hybrid working has seen businesses retrenching their office space. Leases have become shorter. Vacancy rates have risen. Banks see increased risk in office buildings as a result, and that makes funding more difficult to secure.
Industrial properties and warehouses, on the other hand, are a different story. Banks are much more comfortable lending against these assets. The reason is simple: tenants in industrial properties typically have significant equipment, machinery, and inventory on site. Moving all of that is expensive and disruptive. As a result, industrial tenants tend to sign longer leases and stay put. That stability translates directly into lower risk for lenders and better lending terms for buyers.
Light industrial properties and warehouses with established, long-term tenants are particularly attractive to banks right now. If you’re considering commercial property investment, this is where you’ll find the most favourable lending environment.
The mistakes I see first-time commercial buyers make
After settling well over a billion dollars in loans across my career, I’ve seen plenty of commercial property purchases go smoothly and plenty that have run into trouble.
The difference between a smooth purchase and one that runs into trouble almost always comes down to preparation.
The biggest mistake first-time commercial buyers make is not consulting the right experts before committing. Commercial property involves far more complexity than residential. There are intricacies that can catch you out if you don’t understand them upfront.
Take tenancy arrangements, for example. Who the tenant is matters significantly. Their financial stability, the length of their lease, and the terms of that lease all affect the property’s value and your ability to secure funding. You need to understand whether the tenant pays all outgoings, including rates, insurance, and maintenance. Many investors assume these costs are covered by the tenant, only to discover they’re responsible for them after settlement.
You can often negotiate for property management fees to be included in the outgoings the tenant pays. But you need to know this is possible before you sign anything.
Building condition is another area where due diligence pays off. Earthquake ratings are a significant consideration in New Zealand. Banks typically want to see an NBS rating of at least 67 per cent. Some buildings struggle to achieve this, and bringing an older building up to standard can be prohibitively expensive. If you don’t check the earthquake rating before purchase, you might find yourself owning a property that’s difficult to insure, hard to lease, and nearly impossible to sell.
My advice to anyone looking at their first commercial property is simple: involve the professionals early. A good commercial lawyer, a building inspector, and an experienced mortgage broker will help you identify issues before they become expensive problems.
How commercial property differs from residential investment
If you’ve invested in residential property before, you might assume commercial works the same way. It doesn’t. The lending criteria, risk profile, and management requirements are fundamentally different.
With residential investment, qualification is relatively straightforward. You typically need 20 to 30 per cent equity, and banks will base their lending primarily on your personal income. Loan terms stretch to 30 years, which keeps repayments manageable. If the rental income covers your mortgage payments, you’re generally in a good position to qualify.
Commercial lending works differently. Banks focus heavily on the income the property itself generates when assessing your ability to service the debt. Your personal income still matters, but the property’s cash flow is the primary consideration. Loan terms are shorter, typically 15 years rather than 30, which means higher repayments. Interest rates tend to be higher as well. And you’ll need substantially more equity to get started, often 35 to 40 per cent or more.
These factors make commercial property harder to get into. However, once you’re established, commercial can actually be easier to manage than residential. Residential tenancies tend to be short-term, with turnover every year or two. Every vacancy means lost income and the costs of finding new tenants. Commercial leases, by contrast, typically run for three to ten years or longer. That stability makes cash flow more predictable and reduces the administrative burden of constantly managing tenant turnover.
Should you buy or continue leasing?
For business owners operating from leased premises, the question of whether to buy your own property is worth serious consideration. The answer depends on your specific situation.
If your business is still in growth mode and you’re likely to need larger premises in the next few years, leasing often makes more sense. It gives you flexibility. When you outgrow your current space, you can simply move to a larger property without the complications of selling commercial real estate.
The calculation changes when your business involves significant capital expenditure at your premises. If you’ve invested heavily in fit-out, specialised equipment, or machinery that would be expensive and disruptive to relocate, ownership provides security.
One of the risks of leasing is that your landlord might sell the property from under you, forcing you to move at an inconvenient time. Owning your premises eliminates that risk entirely.
I’ve worked with business owners who assumed they couldn’t afford to buy, only to discover that their mortgage repayments would be comparable to or less than their current rent. When you factor in the equity you build through ownership and the protection it provides for your business, purchasing can be a compelling option. The key is to run the numbers for your specific situation and ensure you can service the debt comfortably.
The bottom line
Is now a good time to buy commercial property? For many business owners and investors, the current interest rate environment creates genuine opportunities. Lower rates mean lower servicing costs, and in many cases, purchasing works out cheaper than leasing.
But the right time to buy is always going to depend on finding the right property, understanding what you’re getting into, and ensuring you have the financial capacity to see it through. Industrial and warehouse properties offer the most attractive lending conditions. First-time buyers need to invest in proper due diligence. And anyone considering commercial needs to understand how fundamentally different it is from residential investment.
Do your homework, involve the experts early, and make decisions based on thorough analysis rather than assumptions. That’s been my advice for over twenty years, and it holds true today as much as ever.
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If you’re curious whether the numbers stack up for your business, get in touch. There’s no cost and no obligation to chat it through. Call 0800 211
