Navigating Cape Town’s Commercial Office Rental Landscape:
A Comprehensive Guide to Choosing the Right Office Space
The Cape Town office rental market is enjoying its best performance in decades, with new businesses opening as investors from other provinces and overseas pour into Time Out’s second place travel destination for 2024.
The global ranking popularity of Cape Town as a place to visit, live, and do business has soared over the past few years and is having a substantial effect on the regional economy.
For prospective office space tenants, however, there’s no doubt that securing the right office space has become challenging. As vacancy rates drop below 10% and developers scramble to build exciting new office buildings to meet demand, finding your perfect office space requires a smart strategy.
If you’re in the market for a Cape Town office space, the good news is that there are still plenty of options in the city if you work with a knowledgeable agent. In this article, we provide an overview of the Cape Town office rental market, survey some of the popular areas for commercial rentals, and a few strategies to secure a premium commercial property that suits the needs of your business.
Office space is at a premium in Cape Town as the city’s popularity explodes
The Cape Town office market is seeing a huge surge in demand with the sector performing so well that it has exceeded its pre-pandemic occupancy and growth levels.
The Rode Report for Q4 2023 provides several examples of Cape Town’s superior performance:
- Rental growth has soared by 10% over the past year as tenants compete for sought after office space
- This is in sharp contrast to Johannesburg which saw a meagre 1% growth in 2023
- The report highlighted three key areas where Cape Town enjoys a major advantage: service delivery, electricity supply, and the resurgence of tourism.
These figures correspond strongly with the experience of anyone trying to secure an office space in the Mother City in the past year.
As companies return to the office and work from home policies revert to an in-office management style, there’s a sudden demand for premium office space with an emphasis on green buildings and facilities that give weight to wellness and a new lifestyle-based approach to working.
The result of changes in HR policy combined with an expectation from workers that a day in the office will be a wholesome experience – complete with visits to an organic coffee shop, gym and wellness facilities, and plenty of green spaces in the building – is that the most modern buildings have become the most sought after.
While premium space sees low vacancies, owners of older buildings are moving fast to renovate their structures and bring them in line with modern tenant expectations.
As a prospective commercial property occupant, this means that finding the perfect commercial space has certainly become more difficult over the past two years.
This is borne out by the latest rental statistics from SAPOA (the South African Property Owners Association).
- Cape Town’s office vacancy rate is the lowest of all metropolitan areas in South Africa, far below the national average of 15.2%.
The following areas are currently the most sought after in the Mother City
CBD
In the Cape Town CBD, the vacancy for premium grade offices is just 3% compared to 12.8% a year ago. A grade properties saw their vacancy rates decline to 4.9%.
The CBD is still the traditional heart of Cape Town’s business community, both at the corporate, small business, and retail level. However, this district also shows the biggest disparity between new and old with some traditional office buildings remaining in the downtown area with lower occupancy rates alongside modern buildings which are becoming difficult to secure rentals in.
The benefit of being based in the CBD is sheer convenience, with its quick access to Cape Town International Airport, and a wealth of activities including fine dining and fitness offerings in the surrounding areas like Green Point and Sea Point, as well as the family focused area of Gardens.
While the latest buildings like the Portside may command a high premium there are certainly many smaller and slightly fewer famous buildings in the region that may suit the needs of an expanding business.
Waterfront vacancies drop dramatically despite exclusive prices
The V and A Waterfront is a Cape Town landmark and ever popular luxury retail and commercial complex that has expanded hugely since it was first built in the late 1980s. As business sentiment recovers post pandemic, the development is in huge demand amongst business owners who won’t settle for anything but the best address.
- Rentals at the Waterfront cater to established corporate and successful retail brands, with banks and wealth management firms and several tech companies rounding off the list of prestigious clients.
- Understandably, rentals at this exclusive development can exceed R225 per square meter, offering the ultimate prestigious business address. Nonetheless, these rates appear to be competitive in the market as vacancies continue to drop.
According to the recent SAPOA report, office vacancies at the V and A have dropped to a mere 0.5% with tenants clamouring to secure premises.
It’s becoming increasingly difficult to rent at the V and A as the market becomes tighter, but the surrounding area, including the new developments at the Foreshore, are a good alternative.
With the same commanding view of the Atlantic Ocean and modern premium office space, the Foreshore offers better availability and rates per square meter that are more accessible to SMBs and growing enterprises.
Claremont emerges as a fair price winner
As the CBD, the Waterfront, and Century City see huge demand and rising rental prices, the southern suburbs are emerging as a popular area for businesses seeking stylish and modern premises in Cape Town.
Claremont has developed into a mini CBD in recent years, featuring standout properties, like the Grove Exchange and Montclair, that offer all the amenities of premier property in the city centre or Waterfront with a slightly less hefty price tag.
According to SAPOA, vacancies in Claremont stood at 9.2% in Q4 2023. While historically low, these numbers indicate that desirable rentals are still available in the area which is also known for its enviable suburban lifestyle.
The latest data gives us a good overview of the average property prices and occupancy rates across the city, but it doesn’t necessarily help respective tenants to predict the chances of finding the ideal space within a given area.
Sought after buildings in trendy areas may be filling up, but there are still some excellent options available – especially in some of the city’s up-and-coming areas. While vacancies continue to drop substantially, a number of buildings may still be available if you work with an experienced agent.
Tips for success in your search for the best office spaces in the Cape
The Cape Town office space market hasn’t been this tight for years. However, it doesn’t mean that businesses should give up their search for the ideal office space in the Mother City.
By following the tips below, you’ll increase your chances of securing the ideal space that caters to the needs of your business today and in the future.
Audit your space requirements
Many clients come to us after several unsuccessful attempts to secure large commercial premises in Cape Town when in reality, a smaller office unit may have been more than sufficient.
Before you settle on a commercial property rental, make sure that you’re not overestimating your space requirements. In the current market, it’s better to size down your operation slightly and secure space rather than insisting on a large floor plan which may not be available in your building of choice.
Set a comprehensive HR and remote work policy
Keeping with the idea of space efficiency, it’s worth noting that one of the biggest uses of commercial space is on chairs and desks. Even if your business has abandoned remote working and is returning to the office full-time, it may be possible to allow some employees to stagger their working hours or days and free up valuable space in the office.
Budget conservatively
With inflation raising costs across the board, a good strategy is keeping your overheads low while investing in the future of your business in premises geared for growth.
Financial planners recommend that businesses budget between 2% to 20% of sales on rent expenses. While the market may be tight this year with rising prices, it’s essential to secure an office space that adds to your business and doesn’t strain your finances.
Work with an expert
From budgeting for a commercial space to searching for your ideal office location, the process of securing your new premises is always easier with the help of a seasoned expert.
By making our team your partners in the search for your ideal office space, you’ll benefit from our years of collective experience and extensive network. Contact us today to get started.
