The Bank of England has cut interest rates for the first time since the start of the pandemic, a move that was anticipated but nonetheless will be seen as a boost for the commercial real estate sector.

The day after the Federal Reserve decided to maintain rates while signalling a possible cut in September, the BoE’s Monetary Policy Committee voted 5-4 to lower its base rate from 5.25% to 5%.

BoE Governor Andrew Bailey at a press conference after the decision at noon on Thursday indicated that rates will not be cut again next month, as the Bank keeps a close eye on inflation. But financial markets are pricing in another cut this year.

“A first look at the statement suggests the MPC is hardly signaling an aggressive easing cycle,” Bloomberg Intelligence Currency Strategist Audrey Childe-Freeman said in a statement.

The cut brings to an end a period that saw one of the sharpest rises in UK rates in modern history, a 5% rise between December 2021 and August 2023, to combat double-digit inflation.

That rise has been painful for commercial real estate and has led to UK investment volumes and capital values falling sharply. In that sense, a reverse, however gradual, will be welcome for the sector.

The FTSE 350 Real Estate Index of property shares rose 1.5% Thursday.

Rates have been stable for the past year, and there has been an expectation that cuts would start at some point in the second half of this year. As a result, the UK real estate transaction market has started a tentative recovery, MSCI said when releasing new investment volume figures this week.

First-half investment volumes were up 7% at £22B, and Q2 volumes were up 26% at £12B. MSCI said the prospect of rate cuts had helped the UK recover, as had the fact that prices dropped in the UK before other European markets.