Interest rate reduction good news for businesses.

Posted On Monday, 28 July 2003 02:00 Published by eProp Commercial Property News
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The recently announced interest rate reduction - coupled with the fact that several further decreases are anticipated in the near future - should increase business confidence and provide some relief for the business sector in general, says Peter Golding, chief executive of Golding Commercial Properties - a member of the Pam Golding Property group.

 

Peter Golding "Hopefully this will be of particular benefit to retailers - especially small entrepreneurs who are among those most adversely affected by the high cost of capital. Many retailers have experienced reduced turnovers due to the high interest rates and consumers' reduced spending capacity.

"Those situated in shopping centres have been under considerable pressure financially as in many cases their rental agreements would have been signed a few years ago when rentals amounted to somewhere in the region of 10% of turnover," he said. "Of late rentals due have been taking a substantial bite out of their income, having been more in the region of 15% to 20% of turnover or even as much as 25%, and with landlords not always in a position to make concessions to their tenants.

"The far more positive scenario - with predictions of several prime rate cuts over the next year - should see these disparities drop and create better yields for businesses through increased consumer spending. "With renewed optimism in the business sector it should provide a much needed boost for small and medium size businesses, which in turn should impact favourably on the property sector through increased take-up of both retail and office space. "It is hoped that several further interest rate reductions will stimulate significant growth in this sector and also see more entrepreneurs coming onto the market, encouraged by the lower cost of capital."

Last modified on Thursday, 22 May 2014 12:10

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