That was the message from the experts who spoke at a recent panel event, hosted by ANZ in Christchurch. Here we cover some of the highlights from each speaker’s presentations, with tips and advice for anyone who’s ready to step into the exciting sphere of direct investment in commercial property.
Falling interest rates and an uptick in business confidence means the commercial property market is strengthening, according to Courtney Doig, Director of Investment Sales at Colliers. This is particularly true in Christchurch, where the local market is looking considerably livelier than what Colliers is seeing in Auckland and Wellington. Momentum is continuing after a strong performance in 2024, where Canterbury overtook Wellington to rank second for total commercial transactions by value.
As investor optimism builds, attractive commercial properties in Christchurch are seeing multi-offer situations. There are a limited number of high-quality opportunities coming to the market, and these are being snapped up, Doig told the crowd. As a result, Christchurch is on track to experience a commercial property undersupply in the near future, which will support stronger prices into 2026.
Courtney also provided the following intel about the current market:
If you are a business owner who is considering buying the building you’re currently leasing, start a conversation with your lender now, advises Andrew Weastell, ANZ Property Finance. Weastell told event attendees that owner-occupiers have a few potential advantages when it comes to buying their building, including being able to leverage their business cashflow to support their debt servicing. Deals that might not work for a traditional buyer could stack up for an owner-occupier, so you might be surprised at what your lender can offer.
Whatever type of buyer you are, the fundamentals of analysing the deal remain the same, Weastell added. Asset class, location, condition, the tenants, type of lease, and the flexibility of the fitout all play their part in determining the quality of the property. And it’s not only about the property, it’s also about the borrower. How financially resilient are you? If you’re experienced in commercial property investment, fantastic – and if you’re not, do you have expert advisors who can assist you? Assembling a strong team in advance will be a major point in your favour from the lender’s perspective.
Weastell also echoed Doig’s comments about Christchurch, noting that right now it’s “the most positive place in New Zealand”. With interest rates looking set to fall further, the timing looks good for investors who are ready to make their move.
Another positive for commercial property investors is the softening insurance market, which has eased up after two years without any nationally significant weather events. Major flooding in early 2023 led to high numbers of costly claims, explained Mark Taylorson, Head of Specialisms and Construction at Gallagher Insurance. This, on top of global catastrophe events created a ‘hard’ insurance market where insurers had reduced capacity and took a stricter approach to underwriting, which in turn led to higher premiums.
After a period of lower claims losses, the local insurance market is heading into a softening phase on the insurance ‘clock’, where there’s more capacity in the market and premiums are lower. Taylorson described current conditions as favourable for most sectors of insurance, and particularly commercial property: competition is fierce and rates are falling, broader coverage terms increasingly available.
One tip for commercial property owners? Regular valuations of your property mean that if costs escalate, you’re still comprehensively covered. Also, taking the longer view, asset owners should keep climate change hazards in mind when purchasing. Assets at most risk may become decreasingly insurable. Your broker can help understand the market and the potential risks that might impact a property’s insurability, so you know what and where to avoid.
The right choices can save you hundreds of thousands on a big property deal, according to Dan Lowe, Property and Construction Sector Lead at Grant Thornton New Zealand. There are three essential facets to consider: the deal, the entity and the tax.
The deal is about more than just agreeing to a price, it now also requires agreeing to a purchase price allocation, which sets the cost price allocation going forward. For example, a $10 million property might have $4 million allocated to land value, $5 million for the building and $1 million for the fitout. That fitout portion is vital for buyers, who can benefit from ongoing depreciation, but vendors might have an opposing view, so you’ll need to reach an agreement. An independent specialist valuer can put a number on your fitout, providing evidence for your depreciation if Inland Revenue has any questions.
Next, buyers need to think about the entity: who is going to own the property? It’s imperative this is set up correctly at the outset, whether you opt for corporate ownership, trust ownership or individual ownership. Tax rates come into play here, with trust tax rates now at 39% compared to 28% for companies. But there’s no set answer that works for every transaction, and much will depend on what else you have going on within your other business and investment interests. So give yourself plenty of time to work through this decision.
Finally, the new Investment Boost is the headliner here, because it can provide an immediate tax deduction when you purchase a new build (from 22 May 2025). This is changing the decision-making process for buyers, who can now weigh up whether to pay more at settlement for a new build in light of an immediate 20% deduction for the improvements value of the property purchase.
If the $10 million building described above was brand new, the Investment Boost might provide an immediate $1.2 million tax break. That’s worth an effective tax saving of $336,000 to $468,000 depending on your ownership structure. That impact definitely has an effect on the return on investment calculations and therefore the decision making process.
As we move further into economic recovery, yet interest rates decline, this could be an ideal time to buy a commercial property. By getting your ‘A team’ together early, you can secure yourself the best possible deal.
