The RICS Service Charge Standard 2025 has just raised the bar on OPEX transparency. Here’s what NZ landlords, tenants and investors should take from it.
RICS released the second edition of its Service Charges in Commercial Property standard in June 2025, with full compliance required by 31 December 2025. It is the biggest overhaul of service charge governance in nearly a decade. It is a UK mandatory standard — but the principles apply directly to how we manage OPEX in New Zealand.
At Klug, we believe the best commercial property decisions are shaped by international best practice, not just local convention. We have mapped the key RICS principles against the NZ framework to show where we align, where the gaps are, and what smart operators should be doing now.
Why OPEX Costs Matter for NZ Commercial Property Under the RICS Service Charge Standard 2025
OPEX is one of the most underestimated costs in commercial property. Based on industry benchmarking data, it adds between 8% and over 50% on top of net rent — depending on asset class, building grade and location.
Office: 14–19% for premium CBD through to 40–56% for C-grade. Fringe offices sit at 28–40%.
Retail: 15–25% for large format up to 35–50% for secondary suburban. Shopping centres run higher due to shared services, marketing levies and centre management.
Industrial: The leanest sector. Prime logistics at 8–14%. Standard warehouse at 12–20%. Older or multi-tenanted stock can hit 20–30%.
The cost drivers — rates, insurance, body corporate, management fees and retail marketing levies — are all climbing. Auckland Council commercial rates have risen 5–8% per annum. Insurance costs are up sharply, especially for older buildings and flood-prone areas.
OPEX governance is not an afterthought. It is one of the most important issues in commercial leasing today.
Key Changes in the 2025 RICS Standard
The second edition tightens five critical areas:
1. Budgets and timelines — Budgets issued at least one month before the service charge year. Year-end accounts within four months.
2. Transparency — All commissions, rebates and procurement discounts disclosed and passed through. Apportionment matrix provided. Digital access expected.
3. Financial controls — No more than 100% cost recovery. Discrete bank accounts. Interest credited to tenants. Independent certification of year-end accounts.
4. Management fees — Percentage-based fees prohibited. Fixed fees only. Tied to service charge management, not rent collection or asset management.
5. Non-recoverable costs — Void costs, capital works, vacancy marketing and landlord investment costs cannot be recovered from tenants.
NZ vs RICS: How Does New Zealand Compare?
NZ commercial leasing is governed by the ADLS Deed of Lease, now in its 7th Edition (late 2024). There is no NZ equivalent of the RICS mandatory standard. The 7th Edition has closed some gaps. Significant differences remain.
Where NZ aligns: Annual outgoings budgets required. Tenants can request supporting evidence. 24-month recovery deadline on uncharged outgoings. Capital charges excluded from utility recovery. Arbitration and mediation standard.
Where NZ falls short:
Insurance commissions: Landlords and managers commonly retain commissions and rebates without disclosure. RICS requires full transparency and pass-through. This is the biggest gap.
Management fees: NZ uses percentage-based fees (typically 3–5% of gross income). RICS prohibits this — it creates a perverse incentive to increase costs.
Reconciliation deadlines: No mandated timeframe for year-end OPEX accounts. RICS requires four months.
Independent certification: No requirement for independent verification. Tenants rely on the landlord’s word.
Fund segregation: OPEX funds typically commingled in trust accounts. RICS requires discrete accounts with interest.
What To Do Now
Landlords and Property Managers: Issue OPEX budgets at least one month early with commentary on cost drivers. Set a 4-month deadline for year-end reconciliations. Move to fixed management fees. Disclose all commissions and rebates. Publish your apportionment matrix.
Tenants and Advisors: Use the RICS Standard as a negotiating benchmark. Request RICS-aligned OPEX provisions even on ADLS deeds. Push for independent certification on major tenancies. Negotiate OPEX caps. Insist on audit rights.
Developers and Project Sales: Structure OPEX with RICS-aligned transparency from day one. It makes assets more attractive to institutional buyers and tenants. For mixed-use, the apportionment matrix is critical.
OPEX Governance: A Competitive Advantage
Well-managed OPEX builds trust. Tenants stay longer. Vacancy drops. NOI stabilises. Asset values hold. Poorly managed OPEX does the opposite — unexplained cost increases, opaque reconciliations and percentage-based fees that climb with costs erode the tenant relationship.
OPEX governance is not a compliance exercise. It is a competitive advantage. With OPEX adding 8% to over 56% on top of net rent, the stakes are too high to ignore.
To discuss how OPEX governance applies to your portfolio or project, contact the Klug team.