This most recent interest rate cut is the 4th in a series of 25 basis point interest rate cuts since September 2024. The FNB Property Broker Survey for February 2024 pointed to rising commercial property sales activity from late-2024, in all 3 commercial property classes, i.e. Office, Industrial and Retail, going into early-2024. Simultaneously, tenant demand for space appeared to be on the rise, causing brokers to perceive vacancy rate declines in all 3 property classes.
This most recent interest rate cut, after a pause in March, is expected to sustain that upward momentum in investor demand/sales in all 3 property classes into the 2nd half of 2025, where a further interest rate cut is expected.
The cumulative interest rate cutting is expected to be a contributor to mildly accelerating economic growth in 2025 and beyond, which in turn is expected to lead to further commercial vacancy rate declines. That should translate into accelerating rental growth in commercial property markets and a consequently stronger net operating income growth rate.
On the new residential development side, after starting the year with still negative 1st quarter growth, we expect the lagged impact of interest rate cuts to gradually turn new residential building plans passed, and thereafter actual building activity too, positive towards the 2nd half of 2025.
However, when we talk about strengthening in the various markets, “moderate” is the key word, because the interest rate cutting to date has not been aggressive at all and is not expected to be going forward either.
John Loos – Senior Economist: FNB Commercial Property Finance
Soweto Sunrise News
