Cape Town Commercial Space – A Seller’s Market?
Cape Town has developed a strong reputation for being the exception to the rule when compared to other South African metros, and when it comes to the city’s property market, the strong growth and demand for commercial space being witnessed this year is simply remarkable.
The Mother City continues to outperform all others with demand for office space accelerating in 2023 while Johannesburg experiences one of its biggest slumps on record.
As the fourth quarter gets into full swing, the commercial real estate market in Cape Town has come full circle and is now a seller’s market again – but how did this amazing transformation come about?
Join us as we take a closer look at the remarkable property market dynamics that have put Cape Town in such an enviable position and make it essential for property investors and tenants to secure their ideal commercial space before supply is squeezed even further.
How Cape Town became South Africa’s Premier commercial property destination
The current property boom is bringing businesses from all corners of the country to relocate to Cape Town. As property professionals who constantly monitor the markets, we like to research and understand the factors that have contributed to the city’s success.
Cape Town’s strategic location, massive investment in infrastructure and record of good governance have come together to create an ideal business environment that is attracting entrepreneurs and not only high net worth individuals and retirees.
An ideal – and idyllic – business location
Cape Town’s natural beauty and enviable lifestyle have made the city a world-famous tourist destination – and the natural environment is an important part of its recent success.
- The psychological benefits of waking up to a beautiful sea or mountain view, with access to beaches, recreational activities like, golf, cycling, mountain climbing, or taking a relaxing wine tour on the weekends are virtually unmatched by any other SA metro.
- South Africans semigrating from Gauteng in particular are seizing the opportunity to live by the coast without sacrificing any of the benefits of city living. In fact, it could be argued that modern-day Cape Town offers a South African lifestyle closest to that of a first world city.
Lifestyle factors are important in the decision to relocate, but the Mother City has much more to offer than scenic vistas.
- From a functional business point of view, Cape Town’s well-developed airport and shipping facilities make it an ideal location for businesses with an international client base and import/export companies alike.
- Amazon’s decision to create a permanent presence in the new, albeit controversial, River Club development in Cape Town from 2024 is a perfect example of the investor confidence that has been created by Cape Town’s combination of enviable lifestyle offerings and reliable infrastructure.
- Finally, from a family point of view, Cape Town’s relatively safe public spaces and the city’s superior educational offerings – including Africa’s top ranked university – provide an irresistible incentive for entrepreneurs with school-age children.
South African investors in search of a stable lifestyle without having to leave the country are flocking to Cape Town just in time to benefit from a R6 billion infrastructure drive.
Huge investment in infrastructure already reaping rewards
Cape Town’s local government prides itself on service delivery, and much of the city’s huge success over the past few decades has hinged on the municipalities ability to deliver usable roads, clean water, reliable refuse removal and the expanding MyCiti bus network.
All of these essential services come together to make Cape Town a more stable place to live and work than many other cities in the country – and it looks like the city government is just getting started.
The 2023 city budget, which was released recently outlines a huge expenditure of R11 billion on infrastructure expansion – making up over 90% percent of the budget and highlighting the city’s continued commitment to world-class services and infrastructure. If anything, the City of Cape Town is doubling down on development as it ploughs huge amounts of money into upgrades, including the following:
- Renewable and dispatchable energy tenders to help end load shedding
- The Potsdam extension and upgrade
- 50 km of new sewage pipes and sewage infrastructure maintenance
- A 24-hour highway patrol and CBD policing service
- Expansion of the MyCiti network to Mitchell’s Plain and Khayelitsha
No metro can function without reliable electricity, and the City of Cape Town is the first major municipality to announce a break away from Eskom as it plans to generate its own power.
The city’s Energy Strategy envisages over 1000 MW of additional generation capacity, to be implemented in stages. Cape Town expects to be energy independent by 2026, marking a major milestone in the history of South Africa’s battle against blackouts.
For business owners looking to semigrate, the prospect of no load shedding is reason enough to relocate their operations to the Mother City.
While some government functions like the train network fall outside the municipal government’s sphere of authority, mayor Jordan Hill Lewis continues his quest to obtain control of local trains and transform them into a piece of 21st-century infrastructure.
Should this plan materialise, it would have the potential to improve transportation conditions in a city where workers still rely on unsafe taxis for passage. Success in this policy strategy would mark a major step towards independent and reliable infrastructure that would bode extremely well for long-term growth and development.
Good government and stability create investor confidence
With unqualified annual audits from the auditor general, reaching back to 2010, the city of Cape Town has become a shining light of efficient and clean government, even as other metros are plagued by corruption scandals on a daily basis.
While no municipality is totally without its share of irregularities, Cape Town’s efficient performance and harsh consequences for illegal actions on the part of municipal officials have won the confidence of investors who see the city as a beacon of sustainability in a country going through a generally unstable period.
The city’s burgeoning population, which is just shy of matching that of Johannesburg, along with fast growing commercial property sales volumes point to a bright future for office space in the Cape Peninsula.
Cape Town’s success: it’s all in the numbers
With a commitment to stability and world-class infrastructure, the city of Cape Town has created the perfect environment for a dynamic property industry, and with R3.6 billion worth of developments in the CBD alone and some of the lowest vacancy rates in decades, the collective efforts of citizens, the government, and the private sector are starting to pay off.
Cape Town is currently a seller’s market with high demands and low stock availability creating a lucrative opportunity for anyone looking to sell, this in turn is driving prospective property buyers to navigate an extremely competitive landscape.
On account of the current-eco political climate it is unlikely to see a decline in the flourishing commercial market, if anything, the opposite is expected. As a commercial property buyer or tenant, you should consider investing now to secure the ideal premises before availability drops even further.
To learn more about our portfolio of premier properties in the Cape Peninsula, contact our team of area specialists today.
