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THE commercial and industrial markets are poised for a positive performance in the next 12 to 18 months, says Errol Diamond of Diamond Properties.

The main reason for Diamond's optimism is the expected cut in interest rates, which will have a tremendous influence on the ecomoy in general and the commercial and industrial property markets in particular.

The prime rate is under pressure to follow the direction of the long-term fixed rate and Diamond quotes a few of the major financial institutions as offering fixes for 3, 7 or ten-year money at between 10.5 and 14.5%. Interestingly, Diamond points out that the average prime interest rate in South Africa over the past 20 years has been 17%. That would mean that any fix below that should be attractive.

Diamond says the ever expanding listed property sector has created "an animal that needs to be fed".

The asset managers, promoters, property managers and facility managers need to acquire commercial, retail or industrial property to boost their turnover and profitability, he says. Decentralisation has been digested in most of the major regions, he says, and the effect of this on the office market going forward should be negligible.

Demand and take-up of offices has been slow, but good quality A-grade offices will always bounce back. The higher costs of construction will always assist in the resurgence of this market, coupled with a lower interest rate climate.

Retail is controlled by the major centres offering the full services and shop entertainment experience. This has and will continue to the attraction, even at the expense of convenient strip shopping. The effect has been a 20% drop in strip shopping rentals, Diamond said.