Renting vs buying business premises in New Zealand comes down to one comparison. Put the yearly rent next to owning’s real yearly cost: interest, the repairs only an owner pays for, and what your deposit could have earned elsewhere. If owning costs more, the building has to rise in value by at least the difference each year to win. Since the 2025 income year, existing commercial buildings can’t be depreciated for tax, so rent is often more tax-efficient. Owning usually wins when you’ll stay ten years or more and the deposit won’t drain the business.
Here’s how to run that sum with your own numbers, plus three tax rules that changed the answer recently.
What does owning really cost each year?
Most owners compare rent with the mortgage repayment. That’s the wrong comparison, because part of each repayment pays off the loan, and that money is still yours. Compare costs with costs:
| Renting: yearly cost | Owning: yearly cost |
|---|---|
| Base rent (ex GST) | Interest on the loan |
| Outgoings passed on under the lease (rates, insurance, body corporate) | The same rates, insurance and body corporate, now paid directly |
| Your own fit-out | Your own fit-out |
| — | Structural repairs, roof, seismic work and other landlord-only costs |
| — | Opportunity cost: what the deposit and purchase costs would earn or save if left in the business |
Most NZ commercial leases are net leases, so you’re probably paying the rates and insurance already. That means the outgoings mostly cancel out. The real contest is rent against interest + landlord-only costs + opportunity cost.
Owning premium = (interest + landlord-only costs + opportunity cost) − rent
If the premium is positive, the building must grow in value by at least that amount each year for buying to break even.
Which tax rules changed the rent vs buy maths?
Building depreciation is back to zero
Between 2021 and 2024, owners could depreciate non-residential buildings. That’s over. Inland Revenue’s depreciation guidance says “from the 2025 income year, the depreciation rate for non-residential buildings has returned to 0%.”
That tilts things towards renting. Rent is fully deductible against business income. When you own, the interest, rates, insurance and repairs are deductible, but the building itself gives you no deduction at all. Fit-out is different: partitions, lighting, heat pumps and similar items can usually still be depreciated. Ask your valuer or accountant to split the purchase price between building and fit-out before settlement, because that split decides what you can claim.
Investment Boost only helps if the building is new
Investment Boost gives a 20% up-front deduction on qualifying new assets. Inland Revenue’s Investment Boost page lists “new commercial and industrial buildings” as eligible if they were first available for use on or after 22 May 2025. It also excludes “second-hand assets that are sourced from New Zealand”.
So a newly built warehouse you commission or buy off the plans may qualify. An existing building bought from another owner won’t. If you’re choosing between a new build and an older unit, that 20% belongs in the comparison. Our depreciation and Investment Boost guide covers how the deduction works for the fit-out and equipment that go inside.
The GST slip that adds 15% on settlement day
Commercial property sold between GST-registered parties is usually zero-rated. Inland Revenue’s zero-rating rules need the buyer to be registered and buying to make taxable supplies, and the property mustn’t be intended as a home. The key detail: “All these conditions must be satisfied at the time of settlement.” If they aren’t met, “the supply must be taxed at 15%.”
This catches owners who set up a new company or trust to hold the building and forget to register it for GST before settlement. On a $1.2m purchase, that’s an extra $180k to find on the day, then claim back. Register the buying entity early and get your lawyer to confirm the GST clauses in the agreement. Our GST filing periods guide explains how long a refund can take, depending on your filing frequency.
A worked example: an engineering firm in Hamilton
This is an illustrative example, not a real business. All figures are assumptions. Use your own lease, quotes and bank terms.
A precision engineering company rents a 700 m² industrial unit. The rent is $84,000 a year ex GST on a net lease, so the firm already pays rates and insurance. The landlord offers to sell the unit for $1.2m. It’s an existing building, so it gets no Investment Boost and no building depreciation.
The purchase:
- The bank lends $780,000. The firm needs a $420,000 deposit plus about $20,000 for legal fees, a valuation, a building report and a seismic assessment.
- Interest in the first year comes to roughly $50,000 on the bank’s quote.
- Landlord-only costs (roof, structure, exterior repaint fund) are allowed at $9,000 a year.
- The $440,000 of cash currently sits in the business, where the owners reckon it earns or saves about $26,000 a year by funding stock and avoiding short-term borrowing.
| Rent | Own | |
|---|---|---|
| Rent | $84,000 | — |
| Interest | — | $50,000 |
| Landlord-only costs | — | $9,000 |
| Opportunity cost of the cash | — | $26,000 |
| True yearly cost | $84,000 | $85,000 |
On these assumptions, owning costs about $1,000 a year more. The unit only has to rise in value by about $1,000 a year for buying to break even. That’s a small hurdle, and the interest bill falls as the loan is repaid. In this example, owning looks sensible for a firm that plans to stay a long time.
Now look at the cash, not just the cost
The cost sum can still hide a cash problem. The bank loan is on a 15-year term, so principal repayments add roughly $40,000 a year in the early years. Monthly, that’s:
- Renting: $84,000 ÷ 12 = $7,000
- Owning: ($50,000 + $40,000 + $9,000) ÷ 12 = $8,250
So owning takes about $1,250 more each month out of the bank account, on top of the $440,000 deposit and costs leaving on day one. If that cash was carrying the firm through slow months, the cheaper option on paper could leave it short in practice. Run both months through the cash flow gap calculator before deciding.
What changes the answer
| Change | True yearly cost of owning | Verdict |
|---|---|---|
| Base case | $85,000 | Roughly even with renting |
| Rent rises to $95,000 at the next review | $85,000 | Owning about $10,000 a year cheaper |
| Interest is $10,000 higher | $95,000 | Owning about $11,000 a year dearer |
| Deposit funded from home equity, so business cash stays put | Opportunity cost falls, but there’s new interest on the equity loan | Depends on the two loans’ costs |
Rent reviews matter more than most owners expect. A lease with market reviews every three years moves the comparison as much as a change in interest does.
If you’re weighing up a purchase and the deposit is the sticking point, check your funding options. It takes about a minute and doesn’t touch your credit file.
When does renting make more sense?
The numbers aren’t the whole decision. business.govt.nz notes that most small businesses lease, and leasing suits businesses that aren’t sure where they’ll be in a few years. Renting usually wins when:
- You could outgrow the space within five years. Selling a building and buying another costs time and fees, and both can hit at the worst moment.
- The deposit would drain your working capital. Growth, stock and payroll usually earn more in the business than in bricks.
- Your location isn’t settled. That might be because customers are moving, a big contract could end, or you’re still testing a region.
- It’s an older building with seismic or weathertightness questions. As a tenant, you can walk away when the lease ends. As an owner, the repair bill is yours.
When does buying make more sense?
Buying usually comes out ahead when:
- You’ll stay ten years or more. Purchase costs get spread thin, and interest falls as you repay the loan.
- Your fit-out is heavy and hard to move. Think cool stores, spray booths, cranes or specialised wiring.
- The rent is high compared with what the property would cost to own, with market reviews coming.
- You can fund the deposit without starving the business. Equity in your home or another property is the usual source.
A common structure is to hold the building in a separate entity and lease it to your trading company at a market rent. The business keeps a deductible rent, and the property sits away from trading risk. Your lawyer and accountant should set it up before you sign, especially the GST registration.
Funding the deposit without emptying the business
The Hamilton example shows the usual pinch point: the deposit and costs, not the ongoing repayments. Owners usually fund that in one of three ways:
- Cash from the business. It’s simple, but it weakens working capital just as you take on a bigger fixed commitment.
- Borrowing against equity in your home or another property, often as a second mortgage behind your existing home loan. Our guide to borrowing against property with an existing mortgage explains how lenders treat that, and the property equity estimator gives you a quick first number.
- Bridging finance while another property sells or your bank finishes its approval.
Lenders will look at combined borrowing against each property. Our LVR guide and property valuations guide show how they calculate it.
Ready to put a deposit plan behind the numbers?
If the sums say buy, the next question is usually how to fund the deposit, the settlement costs or a GST bill without slowing the business down. That’s the kind of gap we help Kiwi owners close every week. We can help with property-secured business loans from $20,000 up to $1m, as a first or second mortgage, and bridging funding when the timing is the problem.
- About 60 seconds to enquire. Asking won’t affect your credit score, so you can check where you stand before you make an offer.
- We don’t spray your details around. Your enquiry isn’t passed to a pile of lenders, and your phone won’t start ringing with calls from strangers.
- A real person reviews your numbers: the property, the equity and the purchase timeline. Then they call you to talk through what fits.
- Fill the form in accurately, including the purchase price, your current mortgage and the settlement date. That way the first option we find is the one that works.