By John Jack , CEO of Galetti Corporate Real Estate
Last week’s meeting of the Monetary Policy Committee (MPC) resulted in an announcement of a hold in the repo and prime lending rate, keeping both at 8.25% and 11.75% respectively.
The commercial real estate sector has been hard-hit by the extended rate hiking cycle of the last two years. Landlords are also buckling under the pressure of higher operational costs due to loadshedding-related challenges that have required many to invest in alternative power solutions to keep tenants happy.
In addition, while inflation has fallen in recent months, rising food and other living costs have reduced consumer spending and foot traffic in many major shopping centres, resulting in profit losses and higher tenant vacancies for some major retail landlords.
While a rate hold announcement is welcomed, rate cuts must be implemented in the second half of the year; failing to do will just delay transactional activity in the market.
Rate cuts will help re-ignite investor confidence, giving a much-needed boost to a sector that has shown admirable resilience since the beginning of the COVID-19 pandemic. Already we have seen a significant uptick in activity and certainly office leasing enquiry which shows how the actual reduction would quickly stimulate growth.
