Interest rates remain a key consideration

The South African Reserve Bank increased the policy rate by 25 basis points in September 2026, taking it to 7.25%. The decision followed renewed inflationary pressures, particularly from higher fuel prices and international geopolitical uncertainty. The SARB said inflation was at 4.4% and indicated that inflationary risks remain elevated.

For commercial property, higher interest rates can affect both sides of the market.

For buyers and investors, increased borrowing costs can reduce the amount of capital that can comfortably be borrowed and influence the returns required from an investment. For businesses, higher financing costs can also affect decisions around expansion, relocation, purchasing premises or taking on additional space.

The effect is not uniform across the market, however.

Commercial property recovery remains uneven

FNB's second-quarter 2026 commercial property research describes a market that is continuing to recover from its cyclical lows, but at a slower and more uneven pace. Broker satisfaction with prevailing market conditions declined from 69% in the first quarter to 39% in the second quarter, reflecting weaker business confidence, higher operating costs and the impact of tighter monetary conditions.

Different property sectors are experiencing different conditions.

Industrial and warehouse property continues to show comparatively strong activity, supported by logistics demand and ongoing supply-chain requirements. FNB's survey recorded Johannesburg as one of the key industrial and warehousing markets, with industrial activity remaining substantially stronger than office activity.

The office sector, by comparison, continues to face higher vacancies, limited tenant expansion and structural changes associated with hybrid working. FNB notes that activity is increasingly focused on repositioning and conversion opportunities rather than broad-based expansion.

What higher rates mean for commercial property decisions

For businesses considering a new lease or property purchase, the current environment makes accurate budgeting particularly important.

Key considerations include:

  • Finance costs: Higher interest rates increase the cost of debt-funded property purchases and can affect investment returns.
  • Affordability: Buyers should assess the property against realistic financing costs rather than relying only on the current rate.
  • Cash flow: Businesses should consider the effect of higher financing and operating costs on their overall cash position.
  • Property pricing: Investors need to assess whether the asking price is supported by rental income, occupancy and the property's longer-term fundamentals.
  • Lease commitments: Occupiers should consider the full cost of a premises, including rental, operating costs, utilities and potential escalation.
  • Sector differences: Industrial, office and retail properties are experiencing different levels of demand, vacancies and investment activity.

Industrial property remains relatively resilient

The industrial sector continues to benefit from demand for warehousing, logistics and distribution space. FNB's second-quarter research describes industrial and warehousing as the strongest major commercial property segment, despite a moderation in activity during the quarter.

This does not mean that industrial property is unaffected by higher rates. Tighter financing conditions can delay acquisitions, developments and business expansion. However, relatively constrained supply and continued demand for logistics-related space provide support to the sector.

For businesses looking for industrial premises, this makes location, building specification, rental affordability and lease terms important factors when comparing available properties.

Pricing and due diligence remain important

The June 2026 Private Property article highlighted the importance of realistic pricing during changing interest-rate conditions, noting that buyers and sellers may need to adjust their expectations as borrowing costs change.

The same principle applies to commercial property.

A buyer should consider more than the asking price. Rental income, vacancy risk, lease expiry profiles, operating expenses, financing costs and the condition and suitability of the asset all contribute to the overall investment decision.

For occupiers, the cheapest rental is not necessarily the lowest-cost option if the property creates additional transport, operational or infrastructure expenses.

Looking ahead

The current interest-rate environment creates a more measured property market, but it does not affect every asset or sector in the same way.

The SARB's September forecast projects the policy rate to remain broadly stable through the remainder of 2026, while inflation is expected to remain elevated into 2027 before moving back toward the 3% target.

For commercial property participants, the focus therefore remains on affordability, cash flow, realistic pricing and the underlying demand for the property type being considered.

For buyers, investors and occupiers, understanding the financing environment alongside local property-market conditions can help provide a clearer basis for evaluating a potential transaction.

Source & Disclaimer

Original Source: How property buyers and sellers can navigate the recent interest rate hike
Original Publisher: Private Property South Africa
Original Author: Seeff
Publication Date: 12 June 2026
Original Article: Private Property – How property buyers and sellers can navigate the recent interest rate hike

This article has been independently summarised, adapted and updated by Osher Property Solutions for general informational purposes. It does not reproduce the original article and should not be regarded as a substitute for the full source material. Readers should refer to the original publication and relevant professional sources for further information.

Interest-rate and property-market conditions can change. The information provided is general and informational only and does not constitute financial, investment, legal or property advice. Professional advice should be obtained where appropriate.

Additional market reference: South African Reserve Bank, September 2026 Monetary Policy Committee Statement.