Rising interest rates are likely to dampen demand for commercial property
Wasanga Mehana spoke to John Jack, Galetti Corporate Real Estate CEO, on the impact of an increased interest rate on the commercial property sector.
With last week’s heft hike, interest rates have risen 2.75 basis points since November last year. This will affect everyone who’s currently servicing debt, including commercial property owners. According to Galetti Corporate Real Estate CEO, John Jack, this will likely affect appetite to invest in commercial property.
The problem we have with the increase in interest rates is the holding rates on property increases. At the same time as interest rates are increasing, you’ve got your long bond increasing and people are looking to see where should I put my money, should I put my money in real estate or should I put put it in bank where you can earn relatively safe interest on your money.
John Jack, CEO – Galetti Corporate Real Estate
The value of your property is also likely to take a knock.
Whenever you see an increase in interest rates cycle, typically, yields of properties push out and therefore the property devalues in the hands of those who own them.
John Jack, CEO – Galetti Corporate Real Estate
Jack says one great trend this year has been vacancy rates decreasing in the office portfolio following the effects of the pandemic.
On the whole, people are sitting on a lot of cash, because they haven’t really deployed a lot in terms of investment
and they cleaned up their staffing situation, cleaned up their business… taking up much better office space for less rentals.John Jack, CEO – Galetti Corporate Real Estate
This article first appeared on 702 : Higher interest rates likely to affect commercial property market
