Commercial property in the Cape Town CBD continues to grow overall from strength-to-strength against the previous year under review. This according to the Cape Town Central City Improvement District (CCID) investment report released during 2016, revealing useful insights.
Economic growth promising
Elton Holland, Director of the Ikon Property Group says the economic growth and sustained investor confidence experienced in downtown Cape Town, despite the economic downturn, is encouraging. The report indicates that Cape Town inner city continues to resist the international downturn trend, illustrated by the R12.086 billion of property currently under construction, planned or proposed for the Central City, to be completed by 2020. This is all working to boost the local economy.
Cape Town beats the trend
The report reveals that the Cape Town CBD is the only major inner-city area in South Africa beating the trend of high office vacancies. While national inner-city office vacancies year on year were up to 15.5%, the Cape Town CBD’s vacancies have continued to decline from 10% to 9.4%.
A total of 1 042 605m² total rentable commercial space is available in the CBD, of which 105 319 m² was available at December 2016.
Average occupancy rates up
The average occupancy rate across all grades of commercial property in Q4 2016 are at 91% (up from 90% Q4 2015) with a total of 279 579m² total rentable retail space available in the CBD, of which it was estimated 95% was occupied as at Dec 2016.
Furthermore the report indicates that a consistent trend of inner city densification is steadily taking root as the emergence of the vertical city, both on the commercial and residential front is evident.
“So much opportunity still exists for commercial investors to capitalise on the densification trend against the backdrop of positive investor sentiment. With demand consistently on the rise in the inner-city, the prospects of creating innovative mixed-use office, retail and residential spaces are very attractive,” adds Holland.
A major catalyst for further economic growth is expected to be the City of Cape Town’s Foreshore Freeway Precinct project, which aims to both incorporate affordable housing in the CBD and as a solution to relieve traffic congestion.
Lowest office vacancy rate
The report also shows that overall the City of Cape Town continues to have the lowest office vacancy rate of all South African municipalities (as at Q3 2016), at 7.6%. Focusing on the Cape Town Central City, the fourth quarter of 2016 saw vacancies at 9.4% overall, down from 10% in December 2015.
The premium (P) grade commercial space has showed the most significant drop in vacancy rates, declining markedly year on year from 25% in 2015 to 13.8% in 2016.
There have also been notable drops in A grade (from 9.1% to 6.7%) and C grade (from 16.4% to 11.9%), the latter due to the conversion of C grade space into residential and hotel accommodation over the course of the last 18 months – a trend set to continue into 2017. The only category in which vacancies rose was B grade, which showed year-on-year movement from 7.3% to 10.3%.
Investor confidence high
“Voted as the “Best city in the world” (Telegraph Travel Awards), we are witnessing the rapid evolution of the landscape of the Central City. This is in response to changing trends in how consumers shop, work and live,” concludes Holland.
“As we continue to see high levels of activity in and around the Cape Town CBD, the V&A Waterfront as well as the Atlantic Seaboard, we are further assured of the sustained level of confidence that investors still have in the future of our city”.
By Elton Holland, Ikon Property Group Director.