24HR emergency NUMBER: 082 415 7127 report an incident

Cape Town CBD sustains high investor confidence – CCID report reveals

Cape Town CBD sustains high investor confidence – CCID report reveals

Property in the Cape Town Central City has soared in value by nearly 40%, from R30.628 billion in 2016/2017 to R42.860 billion in 2018/2019 – with 39 new developments worth in excess of R13.5 billion in the pipeline.

This is the key finding in the latest edition of The State of Cape Town Central City Report 2018 – A Year in Review (SCCR) published today by the Cape Town Central City Improvement District (CCID).

Data in the seventh edition of the annual report (which reflects on the economic climate in the CBD across the previous year),  shows sustained confidence in the development potential of the Central City, despite South Africa’s immense economic pressures, says CCID Board Chairman Rob Kane.

The report is indispensable to investors, developers and retailers seeking to invest in a dynamic city centre.

Among other key findings are that:

  • 39 new developments (recently completed, currently underway, planned, or proposed in the CBD) include completed projects valued at R2.798bn, developments under construction valued at R1.747bn, planned projects equating to R4,296bn in value, and proposals on the table valued at R4.740bn;
  • While vacancy rates for commercial office space rose in the last year, with 30 000m2 of new office space coming on to the market, Cape Town continues to have the lowest office vacancy rates of South Africa’s five largest metropolitan centres;
  • The retail sector serving workers and residents in the downtown area has remained stable, despite lagging economic conditions, with a steady 93% retail occupancy rate, and an increase of more than a third in the number of restaurants in the CBD, from 114 in 2017 to 153; and
  •  Cape Town has affirmed its status as the leading digital city in Africa, recognised as a hub for technology development and innovation, and providing over 40 000 jobs in the sector, significantly higher than other tech hubs such as Johannesburg (20 000), Lagos (9 000) and Nairobi (7 000).

The most significant indicator of investor confidence in the Cape Town Central City is the growth in property value of more than R12.2 billion from 2016/17 to R42.860 billion.

Kane notes that while the overall value of properties is likely to change with the adjudication of objections in the City of Cape Town’s current round of updating the General Valuation roll, “we are heartened by the increase in gross valuation for the Cape Town Central Business District (CBD). Combined with the developments underway or proposed, the overall picture shows confidence in the development potential in the Central City.”

In its assessment of the commercial sector, the report notes that vacancy rates rose during 2017 and 2018, primarily as a result of 30 000m2 of new office space coming on to the market. New developments include 16 000m2 at KPMG’s The Halyard, 6 500 m2 at the ENS building and 3 000m2 in the upgrade of the Maserati building, among others. Nevertheless, Cape Town continues to have the lowest office vacancy rates of the five largest metropolitan municipalities, despite a 50 basis-point increase during the last quarter of 2018.

Kane comments: “In terms of office rentals, rates have remained largely stable. Stronger drivers are required to support future demand and to improve the vacancy rate and asking rental growth. These drivers include growth in capital investment, employment and renewed business optimism in a changing political landscape.” 

Data on the residential property sector shows that apartment prices in the CBD have increased by 97,6% over the last five years alone.

Says Kane: “In 2018, the median price of apartments sold in the CBD was R2,1 million, slightly higher than the median of R2.0 million in 2017. After cooling slightly in 2017, as activity levels in the housing market adjusted to prevailing economic conditions, the completion of two new residential developments saw unit sales increase to 361 units in 2018, up from 316 in 2017.”

Nonetheless, Kane explains that prices have run ahead of economic realities in recent years: “Deteriorating affordability has shifted conditions from a seller’s to a buyer’s market, in which buyers are willing to wait for value to return to the market while sellers are no longer dictating prices. We’re also seeing fewer people ‘semigrating’ to Cape Town from across South Africa. This has resulted in a softening in demand for properties in Cape Town, including in the CBD.”

The report suggests a revealing trend in terms of home ownership. Nearly 60% of city dwellers own their properties, while nearly 25% are tenants in rental properties. The remaining 15% own their property and rent to tenants.

Former commercial buildings in the CBD converted to residential buildings include Triangle House, and the former Nedbank building on the Foreshore, recently launched as The Onyx.

A key theme of the 2018 SCCR is Cape Town’s rise as the leading digital city in Africa. Over the past decade, the city has also become a leader in mobile software, revenue management and payment processes, with 56% of emerging tech or tech-enabled companies having headquarters in the Western Cape.

The digital city has also facilitated a new way of working: the rise and rise of co-working spaces is another metric that supports the notion that individuals and business owners are looking for flexibility in their work lives. This year’s report identifies 17 co-working spaces in the CBD offering flexible, pay-as-you-go or short-term leases for office space, with shared services and communal spaces.

“These spaces suit a digitally savvy population. The co-working model is growing around the world, disrupting traditionally restrictive office leases. As a recognised digital city, Cape Town’s CBD is well-placed to support the new way of working,” says Kane.

Drawing on the results of the CCID’s annual online residential survey, the SCCR reveals that proximity to work, leisure and recreational spaces, the city buzz, and the diversity of the downtown lifestyle are among the top reasons for living in the central city. The report shows that the CBD continues to attract young and middle-aged professionals seeking a more compact, flexible lifestyle at the heart of the city.

Most downtown residents are employed full-time, are self-employed or freelancers working in media, marketing, communications, PR, advertising and publishing.

Kane says the report shows that most central city residents are immersing themselves in the live, work and play ethos of the CBD.

“The CBD is geared to support the downtown lifestyle. For example, 153 restaurants are now operating in the CBD, which is significantly more than the 114 in 2017. There are 35 gyms and sports shops operating in the Central City and the café culture and artisanal food scene is growing. This is aligned with another trend that has emerged this year, which is the rise of micro-apartments. People living in the city are opting to live in smaller spaces and are taking advantage of the downtown amenities.”

The occupancy rate in the retail sector serving workers and residents in the downtown area has remained stable at 93%. Of the 3 091 private formal enterprises in the Central City, 1 038 are classified as retailers. In particular, retail has surged in the East City, with several new outlets opening in that area in the last year.

Kane says: “The report notes that a growing number of residents live in the East City, where there has been a corresponding increase in retailers and creative industries. This is creating a vibrant hub of activity in the area, which is a marked contrast from the stagnation the area was experiencing in 2008.”

Other features in the report include:

  • Breakdowns of all the business sectors in the Central City, including focus on specific sectors such as business process outsourcing, arts, retail and co-working sector
  • An in-depth look at the conferencing, eventing and visitor economy of the Central City
  • Average residential and commercial rentals.
  • A property investment map detailing the 38 locations of current construction sites as well as those of planned/proposed projects
  • A review of the effects of the 2018 drought and the implications for the overall resilience of Cape Town
  • Highlights from the CCID annual online residential and retail surveys.

Issued by Irvine Partners on behalf of Sharon Sorour-Morris, Communications Manager: Cape Town CCID

FOR ALL MEDIA ENQUIRIES AND TO REQUEST INTERVIEWS:

Sharon Sorour-Morris
Manager: Communications
Central City Improvement District
sharon@capetownccid.org
082 216 0835