June 2017, Cape Town – The Cape Town Central City looks towards creating a resilient CBD by connecting the dots between property investment, retail, commercial activity, public entities and its own downtown communities to weather both the economic and political uncertainty currently facing South Africa.
Speaking this week at the Cape Town Central City Improvement District’s (CCID) annual business breakfast, CCID chairperson Rob Kane acknowledged that just as the rest of the country was feeling the pressure of economic and political uncertainty, so too was Cape Town’s traditional CBD: “Now is the time to consolidate, and while we look proudly at our gains over the past few years as the Central City, we also need to look towards both short-term and long-term survival and the best way to ensure it.
“It’s time not to think so much in terms first of supply and then demand, but to now instead look very carefully FIRST at where demand lies – for example, among the needs of the daily workforce that are the heart of our downtown, to our student communities and our visitor economy. And THEN, once we have carefully assessed the demand, we can strategically work out how best to tweak our current offerings, where needed, to supply those demands, whether they be in retail, residential, creating job opportunities or attracting the right kind of investment that will keep this CBD of ours vibrant, and a major contributor to the success of city, province and country.”
In his address to an audience made up equally of members from private and public enterprises, CCID CEO Tasso Evangelinos agreed, referring to the City of Cape Town’s recent incorporation into the Rockefeller Foundation’s “100 Resilient Cities” (RC100) programme: “Over the past five years, we’ve been publishing our annual investment guide, The State of Cape Town Central City Report, in which we’ve collated data on investment and trends that have surfaced in terms of our area. We now want investors interested in the CBD to use this body of work to look cross-sectorally to make the best investment decisions not only for themselves in the short term, but in how we can all work together to ensure that opportunities continue into the future.
"In other words, we need to bring the seven qualities of resilient cities, as defined by the RC100 programme, down to Central City level and ensure that we are reflective, resourceful, robust, redundant (in terms of creating spare capacity for times of need), flexible and, above all else, inclusive and integrated.”
Reflecting on the results of the 2016 report and updating the audience on trends over the last six months, its author and editor Carola Koblitz, noted: “We’re starting to see a consolidation in the Central City in terms of the fact that we’ve seen growth over the past few years equally across a number of sectors, from the growth of commercial property and the development of new residential property, to the changing face of retail. As we now face a period of economic uncertainly countrywide, now is the time to carefully examine what we have, establish where the gaps are and work hard towards filling those gaps.”
In terms of consolidation, she noted that the residential market seemed to have leveled off slightly: “The rand per square metre is still showing growth over the past six months, but we’re seeing less of an escalation in year-on-year prices than we’ve seen over the past few years when property in the Central City was still coming off a very low base. From December 2016 to June 2017, we’ve seen the rand per square metre increase by 5.2%, from R33 921/m2 to R35 700/m2, as per transfers registered at the Deeds Office.”
R187 million in residential sales have been recorded since the beginning of the year, across 81 units that have transferred, with an average selling price of R2.3m per unit. “This is approximately the same average per unit we were seeing at the end of 2016,” notes Koblitz, “but there is a shift is in unit size, which has come down from an average of 71m2 at the end of 2016 to 64.8m2 in June 2017.”
Koblitz did, however, note her concern around the reporting of property prices in the Central City: “Very often, unit or rand per square metre prices are quoted for the Central City that actually take a far wider area into account. The Central City is not the Atlantic Seaboard, the V&A Waterfront or indeed the rest of the City Bowl. The perception is that prices in the Central City are much higher than they are. This should be taken into account when planning for future residential in the CBD.”
Not that the Central City was without other opportunities, noted guest speaker Deon van Zyl, chairperson of the Western Cape Property Development Forum. In his presentation on “Creating a resilient residential economy in the Central City”, he believed it was time for private developers to engage more closely with affordable accommodation particularly for “the missing middle” – middle income earners and, in particular in the CBD, those who made up large volumes of the area’s workforce, citing examples such as “office workers, teachers, bank clerks and shop managers”.
He also encouraged the private sector to see the development of rental properties as a strong business opportunity: “I think it is also critical for the private sector to take the lead on these topics and explore the opportunities. If we do not, I have no doubt that the political world will step up to the plate and start to create inclusionary policies that will force developers to provide affordable accommodation. We also need to engage with government on the formation of these policies now before we end up with a model that just does not work.”
Speaking to current rentals in the Central City, Koblitz noted a slight decline in the cost of monthly rentals, with many more units available on the market for rent than there had been in December 2016. “We currently have 230 units to rent in the CBD, versus 112 in December 2016. We’ve also seen a slight decline in average monthly rentals being asked – down from R15 081 to R14 000 for a one-bedroom unit and from R22 290 to R20 000 for a two-bedroom unit. There is quite a bit of choice available and we are assuming there is also room for negotiation.”
Demand for well-priced studio apartments remains high: “There is little to rent in this size on the market, and they are still attaining around R10 000 per month in rentals,” says Koblitz.
Commenting on the City of Cape Town’s most recent 2016/17 official property valuations report, which had placed the overall nominal value of all property in the CBD at just over R30.62 billion, Koblitz noted that there was currently R4.3bn under construction in the Central City (within the CCID’s boundaries), with an additional R8.1bn either in planning or proposed for development to come on line before 2019. The most recent developments added to the CCID’s data since December 2016 were the construction of two additional residential developments – Signatura’s redevelopment with Nedbank of the old Nedbank commercial complex on the Foreshore (to the value of R700m) and the Tuynhuis development in Queen Victoria Street (for which an investment value was still to be made public).
Says Kane: “We are pleased to note that the other developments currently under construction range across the full spectrum from public infrastructure to private, and in terms of private from commercial (incorporating retail at ground level) to hotels and residential. This indicates that there is a healthy spread across various sectors and that the CBD is still growing across all these sectors – a strong indicator towards maintaining our resilience as the Central City.”
In terms of opportunities for new businesses in the CBD, the latest The State of Cape Town Central City Report was designed with large emphasis placed on a precinct-by-precinct breakdown across the types of businesses situated in each area, the numbers of educational institutions (and students attending), the placement of residential complexes, and the number of retail outlets to be found in terms of both entertainment venues (bars, clubs and restaurants) as well as all other retail.
Says Koblitz: “We’ve now extended this information onto precinct maps that can be called up on our www.capetownccid.org website, under our ‘Invest’ section. Visitors to the site can see where all activity is situated in each of our four precincts, and in conjunction with the 2016 publication investors can make educated decisions in terms of placing new businesses.”
Adds Evangelinos: “We would particularly like to see a stronger and more diverse retail experience in the CBD that caters to the growing needs across many of our communities – from residents and office workers to the thousands of students at institutions in our boundaries or who pass through our Central City on their way to other destinations. Using the report in conjunction with our website can now greatly assist possible business owners to see where these opportunities could be situated.
“For example, even though the East City precinct has some of the largest and oldest residential complexes (many of them with high numbers of students and young professionals) and huge numbers of daily users of the numerous governmental institutions in its boundaries, the area has only 16% of all CBD restaurants and 19% of all other retail. Opportunities definitely exist to service the various downtown markets better.”