Cape Town CBD’s economy remained stable in 2020 despite Covid-19, with the official nominal value of all property set at R43.8 billion by the City of Cape Town – and at least 31 new developments worth more than R6.9 billion in the pipeline.
This is according to key findings of the annual State of Cape Town Central City Report – a year in review (SCCR) published by the Cape Town Central City Improvement District (CCID).
Data in the ninth edition of the annual report (which reflects on the economic climate in the Cape Town Central City across 2020) shows steady confidence in the development potential of the CBD, says CCID board chairperson Rob Kane.
“The Cape Town CBD once again proved its resilience in a very tough year. While some businesses have closed, many others have survived the first Covid-19 year and it is very encouraging to note that investor and property development interest in the city centre remains steady,” notes Kane.
Of the 31 new developments (recently completed, currently underway, planned or proposed in the CBD), 5 were completed in 2020 (with a conservative estimated value of R972 million), 15 were under construction during 2020 (with a conservative estimated value of R2.9 billion), 9 were in the planning phase (with a conservative estimated value of R2 billion) and 2 were proposed (with a conservative estimated value of R860 million).
Key developments include Abland’s P-grade skyscraper, 35 Lower Long (valued at R500 million), Ryan Joffe Properties’ The Rockefeller at Harbour Place (valued at R500 million), and WBHO’s Hotel Sky (valued at R400 million).
Since the report’s publication, the conversion of commercial building, One Thibault, which has been an iconic feature of Cape Town’s skyline for decades, into a mixed-use office and residential development, has confirmed the trend of repurposing commercial buildings.
Other findings of the 72-page report include:
- The 2 846 entities doing business in Cape Town’s CBD during 2020, including 1 126 retail and entertainment entities, remained resilient to the economic knocks brought on by the pandemic and the subsequent lockdown restrictions.
- With 1 038 707m2 total commercial (office) space available in the CBD, the office vacancy rate as at 2020’s fourth quarter, was 14.6%.
- The economic effects of Covid-19 led to the closure of hundreds of retail outlets, but these only slightly outpaced the opening of new establishments, indicating a willingness of entrepreneurs to remain agile.
- The total vacancy rate of retail space (31 077m2) in the CBD in 2020 amounted to 11.5% of the total space available. In 2019, the total vacancy rate of retail space was 9.4%.
- The total volume in m2 of retail space available in the Central City at the end of 2020 amounted to 270 176m2, marginally less than the 274 605m2 recorded at the end of 2019.
- The total space occupied at the end of 2020 declined by 9 597m2 from 248 696m2 recorded towards the end of 2019 to 239 099m2 at the end of 2020 – a decrease of -3.9%.
- Despite Covid-19’s effect on the tourism sector and the knock-on effect on the Central City’s visitor and event industries, two hotels were among the developments in 2020, namely the R400 million Hotel Sky development and the Old Bank Hotel. Two aparthotels, WINK Foreshore, valued at R75 million, and Urban Oasis in the East City, were completed in 2020.
The most significant indicator of investor confidence in the Cape Town Central City was the growth in property value from R30.6 billion in 2016/2017 to R43.8 billion in 2018/2019.
Kane notes that the increase in gross valuation for the Cape Town CBD remains heartening and speaks to continued investor confidence and development potential.
The commercial property market remains resilient in 2021, with the continued conversion of office buildings into mixed-use developments or residential developments. “This indicates a flexibility in the sector,” he says.
Data on the residential property sector showed innovative offerings, coupled with low interest rates, which continued to attract investor interest.
“Developers have responded with accommodation offering flexibility, ease of use, and affordability” says Kane.
The key trend to emerge was the focus on community, with property buyers becoming members of the development’s ‘club’, rather than simply owners or tenants, and co-living and co-working spaces became the norm.
Of the 15 developments under construction in the CBD in 2020, at least 9 were residential developments valued at R2.07 billion.
The median price of apartments sold in the Central City in 2020 was R1.65 million, which is less than the R1.8 million median price reached in 2019. The most sales were recorded in the R20 000 – R29 999/m² price band.
“The distribution of sales across the various price bands shifted from the most being recorded in the R30 000 – R39 999/m² category in both 2018 and 2019 to the lower band in 2020. This can be attributed to the price correction in the national residential housing market in recent years which has brought house prices in line with prevailing economic realities” says Kane.
In 2020, the median price of R1.65 million for sectional title units represented an 8.3 % decline relative to the median price achieved in 2019, which was R1.8 million. In 2020, 130 units were sold compared with 174 the previous year.
In terms of rentals, at the end of 2020 (end-January 2021), a total of 475 units were listed on Property24.com as available for rent in the Cape Town Central City. This compares to 180 units listed end-2019.
“There was a significant increase in available rental stock in 2020 as repeated lockdowns and subsequent travel restrictions impacted the tourism and event industries. This prompted numerous units, which were previously available as short-term lets such as Airbnb, being added to the long-term rental pool” says Kane.
Other features of the report include:
- Breakdowns of all the business sectors in the Central City.
- A property investment ‘map’ detailing the locations of current construction sites as well as those of planned or proposed projects.
- Essays by Tim Harris, former CEO of Wesgro, Patrick Buthelezi, economist: Sanlam Investments and Bronwyn Williams, trend economist: Flux Trends on what the future holds.
- Highlights from the CCID’s annual online residential survey.
- A detailed breakdown of precincts that make up the Central City.