Due Diligence Checklist: Commercial

Due diligence is the phase that decides whether a commercial property acquisition makes you money or costs you. Get it right and you buy with your eyes open. Get it wrong and the problems surface after settlement, when fixing them costs far more and the leverage to negotiate has gone entirely.

Proper due diligence covers five distinct areas, each built to surface a different set of risks to a property's value, income, or long-term viability. Here is the checklist we work through on every acquisition. Read it whether you use a buyer's agent or run the process yourself; either way you should know what thorough actually looks like before you sign.

Most buyers cover two or three of these five areas. The problems almost always come from the ones they skip.

1 Legal Due Diligence

Legal due diligence establishes three things: that you can own the property cleanly, that you can use it for what you intend, and that you won't inherit someone else's liabilities. Everything else rests on it.

• Title search and ownership verification. Confirm the vendor holds clear title to sell. Flag any caveats, mortgages, or claims registered against the title.
• Encumbrances and easements. Review every registered easement, covenant, and restriction, and work out how each one constrains use, particularly for future development or modification.
• Zoning and planning controls. Confirm the property's zoning classification and that both the current use and your intended use are permitted. Check for any overlays, heritage listings, or environmental controls that may apply.
• Planning permits and approvals. Get copies of all existing planning and building permits. Confirm every work on the property was properly approved and that no enforcement action is pending.
• Environmental certificates. Request a Section 32 or equivalent disclosure statement. For industrial or former industrial sites, obtain Phase 1 (and if necessary, Phase 2) environmental site assessments to identify contamination risks.

We put a specialist property solicitor on the legal review, but we don't hand it off and wait. We read the findings ourselves and work out what each one does to the investment case.

2 Financial Due Diligence

Financial due diligence answers one question: does the income and return justify the price? Answering it means going well past the vendor's marketing materials.

• Lease review. Read the full lease documentation, not the heads of agreement or a summary. Rental amount, payment frequency, review mechanisms, permitted use, and every special condition.
• Rental income analysis. Test current rental income against market evidence. Work out whether the passing rent sits above, below, or at market rate, and what that means for future rent reviews and vacancy risk.
• Outgoings analysis. Get a full schedule of outgoings: council rates, water, land tax, insurance, body corporate fees (if applicable), and management costs. Sort which are recoverable from tenants and which the owner wears.
• Capitalisation rate assessment. Calculate the capitalisation rate from net income and set it against recent comparable sales in the precinct. Read what the cap rate says about how the market prices the asset's risk.
• Comparable sales analysis. Review recent sales of similar properties in the area to build a defensible view of market value, adjusting for differences in lease profile, building quality, land area, and location.

We model every acquisition and stress-test it against the scenarios that actually hurt: vacancy, rental decline, interest rate movements, and capital expenditure requirements.

3 Physical Due Diligence

Physical due diligence is about the building itself: its condition, and the maintenance, repair, or capital expenditure it will demand that could eat into value or income.

• Building inspection. Engage an independent building inspector to assess the structure overall, including walls, floors, ceilings, windows, doors, and common areas.
• Structural engineer report. For older buildings, or where the building inspection raises concerns, commission a structural engineer's assessment of the load-bearing elements, foundations, and structural integrity.
• Asbestos and hazardous materials. Obtain an asbestos register and management plan (required for all commercial buildings built before 2004). On industrial properties, assess the risk of other hazardous materials, including lead paint, PCBs, and chemical storage residues.
• Essential services compliance. Confirm all essential safety measures (fire detection, sprinklers, emergency lighting, exit signage, mechanical ventilation) are current and compliant with the relevant building code and Australian Standards.
• Roof and facade condition. Look hard at the roof membrane, guttering, downpipes, and external cladding. Roof replacement is one of the most significant unplanned capital costs in commercial property ownership.

Physical problems rarely kill a deal. They are a negotiating tool. A well-documented building condition report is the evidence you use to adjust your offer price or negotiate vendor rectification works before settlement.

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4 Tenant Due Diligence

The tenant is your income. How healthy they are, how committed they are to the premises, and the terms they occupy under all decide how reliable that cash flow really is.

• Tenant financial health. For listed or large private tenants, review publicly available financial statements, credit ratings, and industry outlook. For smaller tenants, request trading history or references where possible.
• Lease terms and conditions. Go past rent and term. Permitted use clauses, assignment and subletting rights, fit-out contributions, and any incentives provided at lease commencement.
• Rent review mechanisms. Confirm how and when rent reviews occur. Fixed increases, CPI-linked reviews, and market reviews each carry a different risk and return profile, so pin down the methodology and timing for each.
• Option periods. Identify any options to renew. Options give income certainty, but they also lock in terms that can turn unfavourable if the market moves, so check whether the option terms sit at or below market.
• Make-good clauses. Read the make-good obligations at lease expiry. A well-drafted clause protects the owner from inheriting a building modified or degraded during the tenancy; a poorly drafted one leaves you with significant reinstatement costs.

A long lease with a weak tenant is not a defensive investment. It is risk dressed up as security. Always verify the tenant's capacity to honour the full lease term.

5 Market Due Diligence

Market due diligence puts the property in context. Will it hold or grow its value and income in the years ahead? That comes down to supply and demand across the broader market.

• Supply pipeline. Research upcoming developments and new supply coming to the precinct. A wave of new stock can push rents down and vacancy up, even for well-located assets.
• Vacancy rates. Get current vacancy data for the submarket from research houses or commercial agents, and read the trend. Rising, stable, or falling vacancy tells you a great deal about rental growth prospects.
• Competing developments. Identify any approved or proposed developments in the immediate vicinity that could compete directly with your property for tenants.
• Infrastructure projects. Research planned transport, road, and utility infrastructure projects that could lift or dent the property's accessibility and desirability.
• Demographic and economic trends. For retail and some office assets, understand the demographic profile and economic outlook for the catchment area. Population growth, employment trends, and income levels all drive tenant demand and rental capacity.

This work needs quality data and the experience to read it. We subscribe to the major research platforms and keep close relationships with commercial agents across all major markets, so our read on a submarket is current rather than guesswork.

How Bold Brings It All Together

Running due diligence across five distinct areas means coordinating a bench of specialists: solicitors, building inspectors, structural engineers, environmental consultants, valuers, and financial analysts. Bold sits at the centre of that process and runs it.

We brief each specialist, hold the timelines, read every report as it lands, and pull the findings into a single recommendation for our client. That recommendation spells out the risks we found, what each one costs, and our call on whether the acquisition should proceed, be renegotiated, or be abandoned.

This is where the value shows. Any single report is useful; the money is in reading them against each other. Minor roof repairs from a building inspection look very different once a lease analysis shows the tenant holds a break clause in eighteen months. The reports do not join themselves up. We do.

Due diligence is not a formality. It is what separates an informed investment from an expensive mistake. Take it seriously, resource it properly, and never skip a section because you are in a hurry to settle.

If you are lining up a commercial property acquisition and want a team that treats due diligence as a discipline rather than a box to tick, talk to us about how we can support your next purchase.